Three Questions To Ask Yourself Before Considering Homeownership
Whether you’re thinking about becoming a homeowner for the first time or you’re coming back into homeownership following a foreclosure, buying a home is both a financial and emotional decision that requires preparation. The Minnesota Homeownership Center wants you to be successful when you step into homeownership. Here are three questions to ask yourself to see if you are ready for homeownership:
1. Is Your Lifestyle Ready for Homeownership?
Homeownership is a big step and it shouldn’t be taken lightly. Before you think about anything else, the most important question to ask is: Is my lifestyle ready for this long-term commitment? Successful homeownership requires a level of financial stability (stable income) AND the desire to commit to living in the same community for at least five to seven years. You should want to establish roots in a neighborhood and be ready for the responsibilities of homeownership. When you buy, you become your own landlord. Repairs, maintenance and upkeep – and the costs associated with them – are your responsibility.
2. Is Your Job or Career Ready for Homeownership?
It may seem like an odd question to ask, but one of the most important aspects of successful homeownership is having a stable income that will allow you to cover the monthly mortgage payments and the additional expenses of ownership that you might not have had when renting. Some additional expenses may be minor, like replacing a furnace filter or the batteries in a smoke detector, but other expenses can be major, like repairing the roof or replacing a major appliance. Even a brand new home will require maintenance eventually.
Most lenders will require that you show two to three years of stable income either at the same job or at least in the same field before they’ll be willing to offer you a mortgage.
3. Are Your Finances Ready for Homeownership?
In addition to a stable income we talked about in #2, you’ll need to have your expenses under control. Good money-management skills are a must if you’re going to successful at homeownership. Lenders will want to see that you have a financial cushion (savings) and aren’t using every penny you have on the purchase of your home with nothing set aside for future unforeseen events.
Another aspect of good money management is keeping your debts under control. The more outstanding debt you have, the more difficult it will be to qualify for a mortgage – and the more stressful it will be day-to-day making both mortgage and debt payments.
If you’d like additional assistance with money management – or would like a non-biased overview of your financial situation to see if you’re financially ready for homeownership, speak with a Homeownership Advisor.
Even though we’ve already discussed the need to understand your financial situation and have good money-management skills, it’s important to understand how much you’re willing to spend on purchasing your home. A mortgage lender can tell you ‘how much home you can afford’ – or how much they’re willing to lend you, but that is not necessarily the amount that you’re comfortable spending on a home. They may not know that you love to travel, or want to save more to retire early or are planning to reduce your work hours once you start a family.
Once you’ve thought through the lifestyle and financial aspects of buying your first home, make sure you’re following the right path to successful homeownership.
To view the image below, Adobe Flash must be installed.
Get Adobe Flash player, here.
You can print out a handy PDF of this image, here
If you’re like us, you know Give to the Max Day – the statewide online giving day when Minnesotans showcase our amazing generosity – is upon us.
You may not know that the Minnesota Homeownership Center is participating in Give to the Max Day as part of our effort to make Smart Choices and Vibrant Communities a reality for all Minnesota families. But what does that mean, exactly, and why should you consider us among your giving choices tomorrow?
Smart Choices means homebuyers are empowered with the information they need to buy when they are ready, and on terms that are in their best interest. The Center’s statewide network provides homebuyer education and counseling to help homebuyers understand what they can afford and how they can best prepare for homeownership. Our advisors connect buyers with loan and down payment programs that will be sustainable in the long-term, and provide free, unbiased guidance at every step of the home buying process.
We also know that smart, sustainable homeownership creates Vibrant Communities where everyone thrives. We are working every day to make the proven benefits of homeownership real for everyone: benefits like improved health, better educational outcomes and stronger financial security.
We know you’re getting zillions of emails and tweets asking for your gift, but we hope you’ll consider a small donation to the Minnesota Homeownership Center, and here’s why:
Our counseling and education programs have helped 200,000 households purchase and retain their homes.
More than half of the delinquent homeowners who work with advisors in the Center’s Advisors Network are able to avoid foreclosure.
Homebuyer education has been attributed to 30 percent fewer mortgage delinquencies, saving communities and taxpayers money in the long-term.
Just $25 can fund eight referrals from our ‘mortgage crisis’ phone line
The benefits of homeownership can alleviate several problems addressed by other nonprofit agencies. Families who own decent and affordable homes report being healthier, safer and more financially secure than their renting counterparts.
We hope you’ll take a moment to learn more about the Center’s work by reading some other blog posts or exploring the resources on our website.
The Center believes the value of homeownership is still strong, and the value of your gift is immeasurable.
Center staff member Ed Nelson sharing with buyers the importance of homebuyer education and counseling.
The Minnesota Homeownership is always looking for new and innovative ways to help homebuyers make smart choices and build vibrant communities in Minnesota. To that end, staff from the Center joined with Wells Fargo, Minnesota Housing and other non-profit and community-based housing organizations this past weekend on the Affordable Home Tour – affectionately referred to as the “homebuyer forum on wheels.”
Wells Fargo rented a large tour bus that took prospective buyers on a unique tour of Minneapolis and St. Paul highlighting affordably priced homes. A REALTOR met the tour at each of the homes to share information about the property AND each home also had a representative from a local non-profit who spoke to the buyers about downpayment and entry-cost assistance programs that they may be able to qualify for to purchase the property.
Potential buyers climb on board the ‘Homebuyer Forum on Wheels’
Between stops, representatives from Wells Fargo, Minnesota Housing and the Minnesota Homeownership Center shared important information for first-time buyers. Of course, the Center was there to highlight the importance of homebuyer education and counseling through Home Stretch and Framework.
One of the tour participants, after visiting some of the homes on the tour stated:
“I can’t wait to take a Home Stretch workshop and learn the right way to buy a home. I lost a home to foreclosure several years ago and I didn’t think I’d ever be able to buy again.”
Seeing people excited about homeownership – and being excited about learning how to make smart choices that lead to successful ownership – is what keeps us going here at the Minnesota Homeownership Center. We’re looking forward to other new and innovative ways to share the importance of homebuyer education with potential buyers. Do you have an idea? We’d love to hear from you.
The Minnesota Homeownership Center is pleased to partner with Wells Fargo Home Mortgage to offer a very unique home tour opportunity. Perfect for first-time buyers that are just thinking about buying a home or are unsure of where to start… participants will be able to view a variety of affordable property types from new construction, condo, move-in ready and a fixer-upper.
While on the ‘tour’ you’ll learn about downpayment and entry cost assistance programs, homebuyer how-to information and how to access special resources for first-time buyers.
Ride along with us on the tour bus or explore the homes at your own pace. The tour kicks off at Elsie’s Restaurant in NE Minneapolis on Saturday, November 8th @ 9am.
In June, the Center released our “State of Homeownership” report, sharing information on the importance of homeownership, the latest data on the uneven housing recovery and expressing our hopes for smart, sustainable homeownership in Minnesota.
Recent research from the geography program at Macalester College shares similar findings on the aftermath of the crisis, showing an unequal recovery among neighborhoods hit hardest by foreclosure.
Avre’s research found “Communities with high concentrations of people of color and low-income residents witnessed the greatest levels of housing value appreciation leading up to the housing crash. However, low-income communities of color and renters across the metro region experienced disproportionately higher rates of foreclosure and housing value depreciation than more affluent, white homeowners in the aftermath of the crash.”
Even today, the Center writes in its report, “Foreclosures continue to weigh heavily on the neighborhoods predominantly of color like Near North and Phillips in Minneapolis, and the Payne-Phalen and Thomas-Dale in St. Paul. In each of these neighborhoods, nearly half of all homes sold in 2013 had been foreclosed upon. Median home sale prices are also low – as low as $81,000 in Near North. Home values have improved in recent years, but 2013 sales prices must still increase by anywhere from 74 percent (Payne-Phalen) to 110 percent (Phillips) to reach peak home values recorded in 2006.”
In conducting his case studies of these areas, Avre uses urban housing submarket theory – in short, the idea that home values tend to appreciate most quickly at the edges of suburban development, and most slowly in the city core. “Yet,” he writes, “not only did a housing bubble develop within North Minneapolis before 2006, but the tracts in the central city also witnessed the most substantial declines in home values following the crash.”
Delinquency rates – a sign of foreclosures to come – are also high in predominately minority and low-income neighborhoods, ranging from 5 to 8 percent of all mortgaged homes. Affluent, mostly white neighborhoods reviewed are seeing the opposite trend. In Southwest Minneapolis, average home sale prices reached $306,000 and distressed homes made up only 9 percent of sales in 2013. There, just 8 percent of homes are underwater and home values have exceeded 2006 peak prices.
Though Avre states homeownership has traditionally been a goal in the working class and lower middle class submarkets, today’s homebuyers of all incomes are more cautious. In fact, more than 3 in 4 Americans believe the housing crisis isn’t over, according to a 2013 survey sponsored by the MacArthur Foundation.
This caution is playing out in Minnesota, where more first-time homebuyers are taking steps to make thoughtful and informed purchases. Overall, homebuyer education is expected to play a greater role in the home buying process in the years to come as lenders, consumer advocates and local governments recognize that education is a significant deterrent to foreclosure. One 2013 analysis by Freddie Mac even found mortgage delinquency dropped by nearly one-third when first-time homebuyers participated in education or counseling.
If you are purchasing your first home – or working with clients that are in the buying process – make sure you avail yourself of one of the best deterrents to future foreclosure… additional information about homebuyer education in Minnesota is available, here.
Even after the foreclosure crisis homeownership remains an important anchor for vibrant communities. It’s the single biggest asset most people will ever own. And having neighbors literally bought-in to a community’s success puts homeownership at the heart of thriving neighborhoods where people are connected and engaged, communities are safe, schools are thriving and people are healthy.
The State of Homeownership brings together the trends we’re seeing in our Network’s services and recent research to give a snapshot of the different opportunities and barriers to homeownership impacting Minnesotans across age, race and regions today.
Some of our key findings include:
Homeownership Remains a Family’s Greatest Asset. More than one-third of total household wealth is in homeownership, on average. Among Black and Hispanic households who own, homeownership still makes up nearly two-thirds of total wealth.
Benefits of Homeownership Extend to Civic Engagement, Health, Education and More. For example, homeowners are 25 percent more likely to participate in civic and neighborhood groups.
Neighborhoods Are Recovering Unequally, Widening The Homeownership Gap. The Homeownership Gap has returned to 1990 levels, and many neighborhoods where Black, Hispanic and other communities of color are the majority of residents continue to face depressed prices and high foreclosure rates. For example, in North Minneapolis prices have fallen so far that a homeowner who purchased in 2006 at the neighborhood’s median price would need to see their 2013 home value increase by 85% to return to its purchase price. A typical homeowner in Southwest Minneapolis, on the other hand, has already recovered any lost value.
The Next Generation of Buyers Are Influenced By Personal, Local Economics. For Millennials, home purchases have been delayed by a slow start to their careers and high levels of student loan debt. Still, 93 percent of Millennial renters hope to own a home someday. In Greater Minnesota, local economies and the availability of homes are driving the next generation of homeownership. For example, Thief River Falls is managing shortages in homes available for purchase, and affordable housing generally, as major employers Arctic Cat and Digi-Key continue to add jobs.
Future Buyers Are Looking For Information, Smart Choices. More than 9,000 Minnesotans sought out education from our Network in 2013 – a 30 percent increase over the number of people who participated in a course in 2006. The Network is seeing people who sought help mitigating a foreclosure now returning to homebuyer education before getting back into homeownership.
This report is the first step in what we hope will be an ongoing conversation with Minnesota communities and leaders about homeownership as an anchor for vibrant communities – and about the importance of education in empowering smart homeownership choices.
Want to bring this conversation to your community? Contact us, and we’d love to set up a presentation or simply talk about how we might work together.
Join the conversation via social media too! #home14
On Tuesday May 13th, the Federal Housing Administration released its “Blueprint for Access” in which the FHA outlines a number of proposed plans to expand access to affordable mortgages for underserved borrowers.
Here at the Homeownership Center, we know that stable homeownership is an enormous benefit both for families and their communities, and that successful homeownership is possible through smart choices based on solid information and applaud the FHA for proposing the pilot program Homeowners Armed with Knowledge, or HAWKfor short, which seeks to integrate housing counseling into the homebuying process for borrowers using an FHA-insured mortgage.
The HAWK program will offer buyers savings on their FHA-insured loans if they complete housing counseling provided by independent nonprofit organizations like the Homeownership Advisors Network here in Minnesota.
Quoting directly from the proposed HAWK plan: “To increase access, we must identify and implement responsible ways for creditworthy borrowers to obtain mortgage credit. This includes encouraging housing counseling. Responsible access can be enhanced by ensuring borrowers are well-educated about the home-buying and mortgage finance process.”
So what does HAWK mean for buyers?
If the proposed plan is enacted, buyers who complete Homebuyer Education and Counseling before signing a purchase agreement, and also complete a pre-closing counseling session, will qualify for a substantial savings on the Mortgage Insurance Premium (MIP) of their FHA-Insured loans. The proposal calls for a reduction of 50 basis points on the cost of the upfront MIP and a 10 basis point reduction in the annual MIP. PLUS, if buyers complete post-closing counseling and maintain their payments, with no delinquencies, for a minimum of two years after closing, they will see an additional 15 basis points reduction in their annual MIP.
According to FHA, the average FHA loan is about $180,000. These reductions could save buyers over $300 per year, and almost $9,800 over the life of the loan.
What happens next?
The entire HAWK program is, at this point in time, just a proposal and will be open to comment as part of the upcoming Federal Register Notice… so many parts of the program, especially the MIP savings, could change.
If the program proceeds past the comment period, which seems likely, FHA will begin to pilot the program in the fall of 2014. The Minnesota Homeownership Center, as a HUD-Approved Intermediary, looks forward to working with FHA on this program to more-fully integrate Housing Counseling into the homebuying process. We’ll keep you up to date as details of the program become available.
If you are interested in learning more about OTHER affordable mortgage options, some with low down-payment options or options for people with less than perfect credit, speak with a Homeownership Advisor today! Counseling is FREE and available to everyone in Minnesota.
6,424 Minnesota Households Take Homebuyer Education
The Minnesota Homeownership Center has released its 2013 Homebuyer Services Report and it shows more good news for Minnesota’s housing market. More Minnesota households took advantage of Home Stretch and Frameworkin 2013 than ever before.
The number of households completing education increased seven percent over 2012 and the number of households seeking one-on-one housing counseling increased by a dramatic 20% to more than 2,500 households.
This is good news for Minnesota’s housing market as we know educating and empowering buyers BEFORE they make one of the largest investments in their lives is one of the best ways to prevent a future recurrence of the most recent housing crisis.
The report, 2013 Homebuyer Services Report, includes demographic and other data for the participants in the programs supported by the Minnesota Homeownership Center during the program year October 1, 2012, through September 30, 2013.
The U.S. Department of Housing and Urban Development (HUD) has announced the Minnesota Homeownership Center’s designation as a HUD Approved Housing Counseling Intermediary.
HUD has been working to strengthen its partnerships with strong networks of multiple counseling agencies in order to leverage resources and improve consumer access to housing counseling services at the local community level. Recognized by HUD for its 20+ years of promoting and advancing successful homeownership through its network housing counseling agencies, the Center will now oversee a network of 20 HUD-approved housing counseling agencies offering housing services in pre-purchase education, one-on-one homeownership counseling, rental information, Fair Housing guidance, rehabilitation programs, Reverse Mortgage Counseling, homeless prevention support, and foreclosure prevention options.
As more first-time buyer loan programs, down-payment assistance and foreclosure avoidance programs require access to HUD-Approved counseling, the Center is pleased to be able to be a resource for consumers and counseling agencies throughout the state. With this new designation we also hope to be able to secure additional HUD funding for housing counseling services in Minnesota.
“We know that homeownership counseling and personalized assistance that help families achieve financial wellness are the best tools to prevent another housing crisis like the one we’ve recently experienced,” stated Ed Nelson of the Minnesota Homeownership Center. “Looking forward, The Center’s Network will continue providing education, guidance and resources to Minnesota families.”
Currently, the Center will continue all activities as usual, overseeing the Homeownership Advisors Network*. A complete list of agencies that are participating in our HUD intermediary network will be posted here on our website in the coming months. In addition, the Center will continue to embrace emerging technologies and tools that will prepare thousands of families for successful, sustainable homeownership and will continue to expand programming for partner agencies that will ensure that the Homeownership Advisors Network is on the cutting edge of housing and financial stability trends.
*Not all current members of the Homeownership Advisors Network will be participating with us in this HUD endeavor. Additional details will be posted soon.
Recently, the Federal Housing Administration relaxed its guidelines for borrowers who “experienced periods of financial difficulty due to extenuating circumstances”. Basically, this is the Federal Housing Authorities ‘second chance’ mortgage program for potential buyers who experienced financial hardship (unemployment or severe reduction in income) during the recent recession.
Known as the “Back To Work – Extenuating Circumstances Program”, or simply the “FHA Back to Work Program,” borrowers with a recent history of bankruptcy (Ch.7 or Ch. 13), foreclosure, judgment, short sale, loan modification or Deed-in-Lieu of Foreclosure can apply for an FHA-insured mortgage and may be able to become a homeowner again much more quickly than ever before.
• Buyers no longer need to wait three years to apply for an FHA loan after experiencing a foreclosure, short sale or deed-in-lieu.
• In addition, they no longer need to wait two years to apply for an FHA loan after experiencing a Chapter 7 or Chapter 13 bankruptcy.
• Buyers must be able to demonstrate that they have completely recovered from the financial event and if they have, the wait time is reduced to just 12 months
Potential borrowers are required to meet with a HUD-Approved Housing Counselor at least 30 days prior to submitting the loan application. The Minnesota Homeownership Center maintains an easy-to-use search engine that helps you/your clients find their closest counselor.
Click hereto search for a FREE non-profit homeownership advisor that can work with you to see if Back to Work, or other mortgage options, will work for you.
Interested in digging deeper? For more information on the FHA Back to Work – Extenuating Circumstances program, see Mortgagee Letter 2013-26.