Ask the expert: Toya Kelker answers common first-time homebuyer questions
Toya R. Kelker, director of homeownership at the East Akron Neighborhood Development Corp., answered some common questions among first-time homebuyers.
Kelker runs the nonprofit organization's free monthly classes aimed at first-time homebuyers. The courses — which have been online during the pandemic — teach everything from understanding credit and managing money to how to shop for a home and maintain it after you buy it.
Q. Who should consider buying their first house?
A. Renters who are paying full rent and have permanent income. You typically pay less for a mortgage payment than a rent payment. Buying a home remains one of the best ways to secure personal wealth.
Q. What should be the first step for anyone considering buying their first home?
A. Before you start shopping for a home, learn about the homebuying process. Buyers need to understand how credit, mortgages and closing costs work. Most importantly, they need to figure out how much they can afford to pay monthly on a mortgage.
Q. What is the most important thing for first-time homebuyers to understand about credit and/or credit scores?
A. Lenders look at credit scores and unresolved, nonmedical accounts, including collections, liens and judgments. The biggest factor, though, is how you use the credit you already have. Keep credit card balances below 30% of your limit. Avoid late payments because any later than 30 days will significantly drop your credit score. And keep installment loans, like car payments, to a minimum since those can initially impact your scores.
Q. Millennials often have student loan debt. Will that preclude many from purchasing their first home?
A. It's all about debt-to-income ratio. If student loans are not in repayment (with a set payment amount), lenders use 1% to 2% of a student loan balance as a payment amount to figure out debt-to-income. This can sometime affect how much money someone can borrow, or prevent them from securing a loan at all. Current payments on loan and credit cards matter.
Q. What expenses do first-time buyers often overlook when purchasing their first home?
A. The total amount needed to purchase are called "upfront costs." They include down payment, closing costs, moving costs, earnest funds, home inspection fees and cash reserves for the unexpected.
Q. How can a first-time buyer figure out how much they can afford — and is that the same as what a lender authorizes them to borrow?
A: Look at your budget and figure out what you can afford, not only for a monthly mortgage payment but household expenses. Buyers need to understand that lenders loan according to gross income (your total pay from employers or clients before taxes and other deductions) NOT net income (how much you make, minus taxes and other deductions and expenses). What a lender offers isn't always what you can afford.
Q. What programs are available to help first-time homebuyers in Greater Akron with down payments and other costs?
A. Some lenders offer their own grants/down payment or closing cost assistance. Federal Home Loan Bank of Cincinnati offers Welcome Home Funds yearly in March through most area lenders and the Ohio Housing Finance Agency offers grants/down payment assistance.
Q. Once first-time buyers have their finances in order and understand the process, what's the first step in looking for a house?
A. After educating themselves, research/choose a lender then seek a pre-approval.
Q. Should a first-time buyer use a Realtor? And if so, what's the best way to find a Realtor you can trust?
A. Buyers absolutely should use a real estate agent. HUD housing counseling agencies are required to provide buyers with referral sheets of at least three real estate agents. Also ask family and friends for recommendations. You can also check the National Association of Real Estate Brokers or National Association of Realtors websites.
Q. How important is a house inspection before buying a house?
A. Very important. There are dozens of components of the home that a trained professional will inspect. Many issues cannot be seen with the naked eye. They will provide a report on the condition of the home. Paying a couple hundred dollars for an inspection before you buy can save you thousands of dollars in repairs or other work.
Q. Finally, once you find a house you want to buy, how long does it generally take between the time you sign the papers and the day you can move in?
A. Typically, 30 to 45 days
For more information on the East Akron Neighborhood Development Corp.'s free homebuying classes, visit the website EANDC.org or call 330-724-0244.