Homebuyer education can make a big difference

By Christa Buchanan
C & G Staff Writer

Homeownership is the first step toward achieving the “American Dream,” but for many, taking that step can be a scary prospect, especially in light of the recent rash of foreclosures, not to mention the poor economy and the multitude of changes in the mortgage industry.

Gone are the days when getting a mortgage could be done in a matter of days, with little or no down payment; and with more changes in the mortgage and real estate industry seemingly popping up on a daily basis, making an already complicated process even more intimidating, it’s no wonder some people are hesitant to purchase a home.

However, there are a number of programs in the metro Detroit area that give potential homeowners the tools and knowledge they need for a successful home-buying experience — and the experts agree, that’s good news for those ready to take on homeownership in a tough economy and housing market.

“Homebuyer education is very important. … They learn about different programs, how to maintain a home, extra expenses that they may not have planned for,” said Matt Adler, a mortgage specialist with North Star Home Lending.

Local homebuyer classes not only cover homeowner basics — such as shopping for a mortgage and insurance provider, finding a Realtor, reviewing closing costs and home maintenance, among other topics — but also encompass money management and credit repair, as well as offering information on various homebuyer assistance programs.

“I think that taking classes before applying for a mortgage is important, so they know what they are getting into before getting a mortgage. … We want to get buyers in the pipeline and get them educated and financially ready to buy, maintain and keep a home,” said Gina Hensley, administrative and financial assistant for the city of Warren Planning and Community Development, which offers a number of programs for both potential and current homeowners, including a new, two-part Homebuyer Preparation Program and Purchase Assistance Project that’s currently accepting applications and is expected to begin Sept. 1.

Other local organizations that offer homebuyer classes and assistance include Lighthouse of Oakland County in Pontiac; Jewish Vocational Services, which has five locations in Oakland, Macomb and Wayne counties; and Macomb County Community Service Agency (MCCSA) — to name a few.

MCCSA and the city of Warren utilize Michigan State University Extension (MSUE) for the homebuyer education classes that participants must take in their respective down payment assistance programs.

“MSU Extension runs a wealth of programs. They do a really great job, and the best thing is the classes are free to the public,” said Kathleen Wasilowski, a case manager with MCCSA, which offers Macomb County residents — except those in St. Clair Shores and Warren — down payment assistance through the American Dream Downpayment Initiative program (ADDI).

The city of Warren, in partnership with MCCSA, also has an ADDI program, among other homebuyer programs, for those wishing to purchase a home in Warren. 

Basic guidelines are the same for both programs:  Participants must have an income level that is less than 80 percent of the area’s median income — in Warren, said Hensley, a single person must make less than $39,150 and a household of four must make less than $55,900 — participants must take 35 hours of homebuyer and maintenance, money management and credit repair education; and establish a savings account for which the monies will be matched to go toward the down payment and closing costs.

MCCSA requires participants to save $2,500 in order to receive $7,500 in “match funds. The city of Warren requires a savings of at least $1,000 and up to $2,500 for which the city will match $3 for every dollar saved.”

“We’re not just helping people buy houses; we are helping people become homeowners,” Hensley said of the city’s new initiative.

Possible demise of down payment assistance programs comes with some good news
“Funding for first-time home buyers is being slashed and taken away.  Our program has had severe slashes in funding,” said Wasilowski, adding that in the past, MCCSA received enough funding to help 25 people, but this year the program received funding to help only two people — and that funding has already been exhausted.

And MCCSA isn’t the only program being affected — myriad down payment assistance programs available for first-time and low- to moderate-income homebuyers are facing elimination.

However, in light of the ongoing housing crisis, much funding for these programs has been cut, and the recently passed Foreclosure Prevention Act — House Resolution (H.R.) 3221, the Housing and Economic Act of 2008, which was signed into effect July 30 by President George W. Bush — has enacted several changes in lending practices, effective Oct. 1, including increasing the required down payment for FHA loans from 2.75 percent to 3.5 percent, increasing FHA mortgage limits to $297,500 in Michigan, and a moratorium on risk-based pricing by FICO (Fair Isaac Corp.) credit scores, among other changes.

The most pivotal change, said Adler, is the elimination of seller-contributed down payment assistance for FHA buyers, including the popular AmeriDream Downpayment Assistance Program that provides qualified low- to moderate-income homebuyers a monetary gift to go toward the down payment. The gift doesn’t have to be repaid, and borrowers must be approved on or before Sept. 30 to qualify. For more information, visit www.ameridream.org or call (866) 263-7437.

“The concern, which helped to spark the movement to eliminate seller-funded down payment assistance, surrounded the seemingly higher default level on FHA loans, which implemented down payment assistance,” said Adler, adding that this could prove to be “more detrimental to a potential housing market turnaround than the increased risk of defaults these buyers represent.”

To that end, U.S. Reps Al Green, D-Texas; Gary Miller, R-Calif.; Maxine Waters, D-Calif.; and Christopher Shays, R-Conn., have proposed an amendment to H.R. 3221. The new proposed bill, H.R. 6694, aims to amend H.R. 3221 to allow seller-funded down payment assistance for buyers who meet a minimum FICO credit score. Presently, there are no FICO credit score requirements for potential seller-funded down payment assistance buyers.

“If allowed to stand untouched, the current pool of potential home buyers will diminish and housing inventories will increase,” said Adler, who urges residents “to contact their U.S. representatives to get behind H.R. 6694 in an effort to have it passed before the Oct. 1 elimination of seller-financed down payment assistance.”

However, H.R. 3221 doesn’t come without some good news: First-time homebuyers that purchase a home on or after April 9, 2008, and before July 1, 2009, are now eligible for a $7,500 tax credit. A first-time homebuyer is defined as a person who hasn’t owned a home in more than three years. To qualify, a single person must have an income under $75,000 per year, and a married couple can’t make more than $150,000 per year.  For more information, visit www.federalhousingtaxcredit.com.

All in all, while getting a mortgage may be a bit more difficult than in recent years, the timing couldn’t be better for credit-worthy individuals to achieve the dream of homeownership, as there are an abundance of homes on the market to choose from, home prices are at a low, and local programs are starting to fill the gaps.

Following is contact information for local organizations that offer homebuyer education and down payment assistance:

Macomb County
• Michigan State University Extension – Macomb County: (586) 469-6430 or www.macombcounty.gov/msuextension/.

• Macomb County Community Services Agency’s (MCCSA): (586) 469-7378 or www.macomb county.gov/MCCSA.

• The city of Warren: (586) 574-4680 or www.cityofwarren.org — click on Community Development.

Oakland County
• Lighthouse Community Development: www.lighthouse.org or (248) 920-6200. 

• Jewish Vocational Services (JVS): downpayment@jvsdet.org or (248) 233-4242.

Federal and State Programs
• The U.S. Department of Housing and Urban Development (HUD): www.hud.gov and click on Select a State or call the local HUD office, located in Detroit, at (313) 226-7900. To find a HUD/FHA-approved housing counselor in your area, call (800) 569-4287. To learn more about FHA-insured mortgages, visit www.FHA.gov or call (800) CALL-FHA (225-5342).

• The Michigan State Housing Development Authority (MSHDA): contact MSHDA’s Southeast Michigan Development Division, located in Detroit, at (313) 456-3560 or (313) 456-3540, or visit www.Michigan.gov/MSHDA.