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Home Dreams, Finance Nightmares

Despite the financial crisis, local programs continue to help first-time home buyers

By Chris Charlson · October 29th, 2008 · News

The American dream of home ownership has become a nightmare for many local residents due to rising interest rates, record foreclosures and intense scrutiny by lenders regarding loan qualification. Even in the current financial crisis, however, loans can still be obtained with the help of government agencies, nonprofit organizations, Realtors, lenders and good old-fashioned preparedness.

According to James Cunningham, Cincinnati field office director for the U.S. Department of Housing and Urban Development (HUD), options and incentives exist for home buyers, but they simply need to know where to look.

He points to Federal Housing Administration (FHA) loans insured by the government to the lender against default. The loan, which isn’t based on credit ratings, features low downpayments of 3 percent (increasing to 3.5 percent in January), isn’t limited to those income qualified (those who don’t exceed a certain income level) and is available to those with a riskier credit profile. In Cincinnati, the government insures new or existing loans up to $337,500.

“A lot of folks are taking advantage of these loans,” Cunningham says. “We’ve seen our numbers increase significantly throughout the full year.”

For income-qualified, first-time home buyers, Cunningham recommends the American Dream Down Payment Initiative administered by state and local governments. It offers grant money for downpayments and repairs and in many cases discounts on mortgages through lenders if applicants first complete counseling or credit program classes.

For those mired in home debt, he says the Emergency Mortgage Assistance Payment offered by the city of Cincinnati provides assistance, as does the nationally sponsored Emergency Mortgage Assistance Payment Plan, which converts conventional mortgages to FHA loans.

Instituted on Oct. 1, the Hope for Homeowners plan allows lenders to reappraise homes and then refinance using the lower rate. Cunningham says the program depends on cooperation from a lender willing to take a loss due to declining property value. He says the plan can both help the lender and the homeowner save an existing home and continue with payments at a more affordable rate.

“One of the things we definitely recommend is talking to one of our counseling agencies in any situation,” he says. “If you’re looking to purchase or you’re in a current mortgage that you’re having trouble paying, the sooner you talk to someone the better.”

The Home Ownership Center of Greater Cincinnati is a nonprofit, FHAapproved lender and counseling agency that provides all-encompassing services to existing home owners and first-time buyers.

President Rick Williams says with today’s more stringent rules regarding credit it’s more difficult to qualify for a loan, but not impossible.

Williams urges prospective buyers to be prepared by first setting a spending limit for a home, obtaining pre-approval for a loan, securing a full downpayment and cleaning up credit history before approaching a lender. The center offers free classes and counseling, charging clients only a small fee to obtain a copy of their credit report.

“It’s much harder to get a home loan these days,” Williams says. “The market has changed. You can’t just walk in and get a loan like you could a couple of years ago. Mortgage companies are far more restrictive with their requirements.”

For first-time home buyers, the center offers the Ambassador Program grant, which he says gives clients $1,000 to be applied to closing costs or downpayments, but there are some restrictions: The residence must be within Cincinnati city limits and applicants must be firsttime home buyers. While some incentives do exist for current home owners, many programs are geared specifically for first-time buyers, he says.

“It’s always been the assumption that existing home owners have built equity in their homes, so it’s more favorable to help the first-time home owner,” Williams says. “Of course, recently that hasn’t been true, especially in the case of the interest-only mortgages.”

At the lending company Keynote Equity Group, owners Scott Greene and Tom Booth agree that today’s housing market has stricter guidelines, but great loans can still be found in both conventional and government-assisted programs. Booth says buyers often believe credit history to be the most crucial factor in determining a loan, but often that’s not the case.

With many loans, especially in the case of FHA, lenders focus on a two-year look-back at mortgage payment history as opposed to late fees or high limit credit cards. He says buyers need to have full evidence of income before approaching a lender, providing a two-year history — anything that would be documented on their taxes.

“Having documentation to support that is the biggest difference between the new market we’re in compared to the old market where you didn’t have to provide as much evidence or documentation,” Booth says.

Greene says prospective buyers can take immediate steps to improve their history by negotiating settlements, paying down credit card bills or getting current on their mortgage. For those already struggling, he recommends calling the lender directly or using one of the many counseling services available in the community. First and foremost, people need to take charge of their own finances and not be afraid to ask for help.

“The worst thing you can do is just sit back and not do anything about it,” Greene says. “There are steps to take, some small steps and some large steps, but as you move forward you’re going to get qualified for programs.”

Coldwell Banker West Shell Accredited Buyer Representative Tim Hamblin says he’s constantly looking to find incentives and breaks for prospective home buyers. The government recently offered a boost in the form of a $7,500 tax credit, he says, available to anyone who purchased a home since April 9, 2008 or will purchase a home up until July 1, 2009. The credit helps assist home buyers in freeing up cash needed for a downpayment.

Tax credits can also be found through tax abatements offered in certain areas of the city and can be found when clients search through the Multiple Listing Service, Hamblin says.

“As far as financing tips, the best advice is to shop around,” he says. “Some mortgage companies discourage this, but it’s in the buyer’s best interest to do so. Don’t use any mortgage company, bank or lender that doesn’t provide a GFE (Good Faith Estimate).”

Hamblin says he advises looking into potential rehab homes that are lower in price and easier to qualify for in terms of a loan. He encourages first-time home buyers to not be afraid even during these challenging times to make their dream of home ownership come true.

“I absolutely love to work with first-time home buyers,” he says. “It’s an exciting time for them, and their excitement motivates me to help them find the perfect home. From the initial buyer counseling session to the moment the keys are handed over at closing, it’s extremely rewarding.”

Get more information about HUD PROGRAMS at www.hud.gov or 513-684-3451; HOME OWNERSHIP CENTER OF GREATER CINCINNATI at www.hometoday.cc; KEYNOTE EQUITY GROUP at www.keynoteequity.com; and COLDWELL BANKER WEST SHELL at www.cbws.com/tim.hamblin.



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