By Adam Ostrach
WASHINGTON, January 15, 2014 – Towanna Price, a single mother of two, had never really considered owning her own home. As a lifelong renter, she wanted to upgrade from her two bedroom apartment in Temple Hills, Maryland to a larger residence where each of her girls could have her own room. Also, though her neighborhood had always felt safe previously, there had been recent car and apartment break-ins. So, she decided to explore other rental options.
However, all the rental properties Towanna looked at in her price range were outdated, small and many did not offer outdoor space.
Then, at the encouragement of her office colleagues who had successfully navigated the home-buying process, Towanna decided to look into buying her first house. She took an important first step in her home-buying journey—she signed up for homeownership development classes. The courses she attended provided her with the answers and confidence she needed to become a proud first-time homeowner.
“I was worried that I wouldn’t be able to raise the funds for a down payment or that I would not find a realtor I could trust,” says Towanna. “But I sat in on a few classes at HomeFree-USA, and I liked the fact that they really educated me about the entire home-buying process. They were there for any questions I had, and they knew the process inside and out.”
Towanna was assigned a home-buying coach, Mr. Herbert, who helped guide her throughout the process and connect her with a realtor who she felt confident and comfortable working with.
Now, Towanna is a proud homeowner of a split-level, single family home in Clinton, Maryland with a backyard and deck. She loves the extra space both inside and outside her new home, and now both of her children can enjoy their own bedrooms.
HomeFree-USA, where Towanna found the resources and knowledge she needed to become a homeowner, is one of the many organizations nationwide in which Capital One Bank is investing to help provide critical homebuyer education and counseling services for homeowners and affordable housing residents in need.
Studies have shown that homeownership counseling helps people find housing options that are more sustainable for their personal situations and needs. In fact, research conducted by NeighborWorks America found that homebuyers who received pre-purchase housing counseling and education were nearly one-third less likely to fall behind on their mortgages than consumers who didn’t receive it. Supporting local housing initiatives, especially in the Greater DC metro area, helps ensure our neighbors have a safe, stable place to call home.
So, how can current renters start the home-buying process today?
Like Towanna, an important first step is to identify a local program like HomeFree-USA and sign up for informational classes. In addition, HomeFree-USA and Capital One Bank offer these five tips to help put renters on a path to home ownership:
1) Find a good coach. A good home-buying coach can make all the difference in your home-buying journey. The right coach will inspire trust and confidence and help successfully guide you through the entire process. Also, without the proper advice, prospective home-owners run the risk of being denied a loan or missing critical deadlines.
2) Build your home-buying competence. Educate yourself about the process and be your own best advocate. Lenders want to see that you are knowledgeable about your financial status and future and that you will still be able to afford your current monthly debt obligations, such as car payments and credit cards, plus your new mortgage and home ownership costs. A common rule of thumb is the 28/36 rule. Your monthly housing payments (including your mortgage, insurance, and property taxes) should not exceed 28 percent of your gross monthly income and your total debt should not exceed 36 percent of your gross monthly income.
3) Know your options and get advice. Knowing your options will help you make smart decisions and secure the best deal. A great place to start is by getting pre-qualified for a loan. Shop around with national and local lenders and get pre-approved for a mortgage up to a specified amount. This will give you a good idea of a price range to stay in, and will put you in a stronger bargaining position for negotiating home-sale price and terms.
4) Improve your credit score. Your credit report tells your story. Make sure it sends the right message. To improve your credit score make sure to track your purchases, pay your bills on time and in full, and check your credit report. You are entitled to a free copy of your credit report once every year. For a combined report from all three major bureaus, go to www.annualcreditreport.com.
5) Act when the moment is right for you. Once you accomplish the steps listed above, you’ll be ready to act.
For more information on how to begin your home-buying process, visit http://homefreeusa.org/ or http://homecoach-usa.com/ and for additional home-buying knowledge, visit http://www.capitalone.com/financial-education/life-events/housing/buying-a-home/.