A home purchase can be very challenging and discouraging for a first-time buyer, but a class Saturday in St. Gabriel provided information that could remove undue stress from the process.
A seminar the Louisiana Housing Corporation presented at the St. Gabriel Community Center provided information on the financing, purchase and warranty issues that come with homebuying.
The most common questions involve down payments, said Sonja Smith of Louisiana Housing Corporation.
Many residents shy away from homebuying because they fear they cannot come up with enough money for the down payment.
It relegates many residents to years of life in rental properties.
Many fear the process required for home ownership, Smith said.
“People fear they’re not making the right decision in choosing a home, and many are afraid that they’re biting off more than they could chew,” she said. “Most of the time if the parent buys a home, the children will buy a home.
“We’re trying to break the rental cycle because now kids make more than parents did back in the day,” Smith said. “In my opinion, when you rent, you’re putting money in someone else’s property when you could be building equity.”
The down payment could depend on the income for the prospective homeowner, she said.
The brackets vary from parish to parish.
Potential homeowners often shy away from the process because they believe they need to ante up a large sum of cash up front.
“They feel you must have a lot of money to put down, fearing that they may need as much as $20,000 for their down payment,” Keller Williams. Kay Snowten said. “They don’t know that you could put as little as 3 percent down or maybe nothing down of you qualify for a grant that may help you purchase a home.”
Even with 100 percent financing, most financiers want assurance that the potential homeowner has some level of financial cushion, Smith said.
“Full financing doesn’t mean everything is free,” she said. “They still want to know you have money in the bank, at least $1,500 in savings.”
They will also examine the expense vs. debt ratio. Debts are reflected on credit reports.
A simple approach can help on that issue, said Bobby Blanchard, vice president of The First, A National Banking Association.
“It means you have to cut back,” he said. “It comes down to what you need versus what you want.”
A good credit record is a far more important aspect in the homebuying process.
A 640 credit score is required to qualify for home purchase through LHC.
Credit may be an issue, but the credit repair services may not be the best route to fix the problem.
Those services charge between $80 and $100 a month and drag the “repair” process more than two years, in many cases.
“Never pay for that service,” Blanchard said. “You can’t fix what’s real.”
Interest rates are low, but sales prices are currently above average in the housing market.
“It’s a seller’s market right now,” Blanchard said.
Home warranty programs are also important.
While the warranty is important, though, it’s also wise to get a thorough report on the condition of the home before the purchase, said Eric Anderson of Smart Choice Home Warranty.
“No question is dumb,” he said. “The only dumb question is the unasked question.”
Self-education often serves as the most important part of the homebuying process, particularly for low-to-moderate income homeowners.
LHC offers free six-hour courses on the process of homebuying and mortgage issues.
Many providers required the course for first-time home providers, Smith said.
For more information on the courses, visit the LHC website at www.lhc.la.gov, or call (888) 454-2001.