How to get mortgage ready AND BUY A HOME STEP-BY-STEP
By Lisa Scontras
An estimated 27,000 renters on Oahu qualify for mortgages and don’t know it. Another 13,000 could qualify to buy a home by simply reducing their personal debt.
As the cost of local real estate continues to rise, many find it hard to imagine being able to buy their own home. But it doesn’t have to be that way.
The Hawaii HomeOwner-ship Center offers classes — generally on weeknights and weekends — covering tried-and-true formulas for boosting credit ratings, paying down debt, budgeting and saving.
“Many families don’t understand how their paycheck could translate to thousands of dollars of a home purchase price,” said Reina Miyamoto, executive director of the Hawaii HomeOwnership Center. “Our staff works with them to create an action plan.”
The center’s homeownership classes address the four common stumbling blocks to owning a home: debt/credit score, budgeting, savings and preparing for the process.
“We assist with establishing credit, improving scores, addressing negative factors on the credit report and planning to reduce debt balances,” said Miyamoto. “The higher your credit score is, you will have a lower cost to borrow funds. Scores in the 800s are excellent, but those in the 700s are still good — qualification for a loan with a score in the 600s may still be possible.
“Regarding the time-frame to improve a score, it depends on the reason for the score being low. If a borrower has a good track history with paying on time, has low balances, but has only established credit for three months, the score will likely not be that high. For those who have credit issues, our staff will work with them to develop a plan to address this.”
Tips to improve your credit score: Pay down balances. High credit usage is a negative factor in credit scoring. Try to keep your debt balance below 50 percent of your available credit.
According to Miyamoto, “Most families do not follow a budget. But if they started to track their expenses and make some adjustments, they may find they have more funds available than they thought for a housing payment.”
With coaching, it’s easier to determine where expenses can be trimmed and establish priorities such as paying down debt and saving for a down payment.
Coming up with a 20 percent down payment can be a stumbling block. But there are many first-time homebuyer programs offering lower — or zero — down-payment options.
“Depending on whether they are a military veteran, or if they want to live in a designated ‘rural area,’ there may be zero-down payment options available,” said Miyamoto.
The classes also address the process of buying a home, including what to expect during the loan prequalification process, finding a real estate agent or making an offer.
The center’s success rate is impressive: 40 percent of people who initially thought they couldn’t afford to buy a home, did — within one or two years. More than half of those who did purchase a home were considered low or moderate income when they enrolled in the program. “Homeowner-ship coaching is unlimited, and it’s up to the buyer regarding when they want to move forward in the process,” Miyamoto added.
For more information about Hawaii HomeOwnership Center’s program, or to sign up for one of the free orientation sessions, call 523-9500.