Don’t believe the hype: Now is actually a great time to purchase a home. That’s the word from Margaret Wooten, the director of the Chicago Urban League’s credit and homebuyers’ counseling programs. In fact, in a chat with Wooten la
Don’t believe the hype: Now is actually a great time to purchase a home.
That’s the word from Margaret Wooten, the director of the Chicago Urban League’s credit and homebuyers’ counseling programs. In fact, in a chat with Wooten last week, she shared with me her frustration over the common feeling among many people that buying a home is simply out of reach in these tough economic times.
“Now has never been a better time for a potential homebuyer to purchase,” she said. “There are so many houses on the market. Sellers are desperate. But everybody is afraid to purchase. This is my prayer every night: ‘Lord, what can I do to get my people to understand that this is the time to purchase?’”
My mind went back to last week’s column, where I wrote about how the financial crisis on Wall Street could potentially impact individuals, families and the larger Black community. The news wasn’t good. The disproportionate impact that the foreclosure crisis has had on Black America has collectively put us in a hole that it will take years to dig out of, a trusted advisor told me.
After speaking with Wooten, though, I felt compelled to issue a reality check that offers a glimmer of hope to counter some of the myths that have been born out of all of the talk of bailouts, tightening credit and foreclosure rescue.
Yes, it is true that credit is tightening and the days of zero percent down, ridiculous appraisals and loans valued at more than a property is worth are over. But homes are still ripe for the picking for those with decent credit and who are able to make a down payment, even if they cannot afford to put down 20 percent.
“To say that the industry is shut down on granting new mortgages, that is incorrect,” Wooten said. “Banks need people to purchase mortgages.”
Take Tyra Smith, for instance. She is a 34- year-old single mother who recently closed a deal on a three-bedroom house in the Cottage Grove Heights community on the South Side. Just three years ago, Smith said she wasn’t even close to being qualified to apply for a mortgage. She sought help from the Chicago Urban League, attending credit counseling and our homebuyers’ workshops to bring her up to speed on what she needed to do to improve her financial standing.
When she approached a lender earlier this year, Smith, who works in the billing department of a health care organization, said her mortgage company referred her back to the Urban League to brush up on her knowledge and educate herself on the current state of the housing market. She was happy to go.
“What I learned that was most important is that if you’re making $35,000 a year, there’s no way you can afford a $200,000 loan,” Smith said. “(Lenders) base your income on what you bring home with taxes included, not after taxes. I based it on my income and what I could afford.”
That lesson became a shield for Smith from her biggest fear: “That I would end up in the fix other people were in.”
That is less likely to happen now because Smith was an educated buyer. She started saving and working to improve her credit before initiating her home search. By the time her credit was reassessed, her pre-approval rating had gone up to $140,000 from $120,000. In addition, her lender helped her to secure two grants–one for $1500 and another for $2000–that she used toward her down payment. The gentleman who sold her the house covered her closing costs.
Smith is a great success story not because of luck, but because of education and partnerships. See, Smith’s future loan officer referred her to homebuyers’ counseling because she wanted to deal with an educated buyer. She referred Smith to the Urban League specifically because of our track record and partnerships with lending institutions.
“There are several banks that are willing and have the capacity to make home loans to the borrower that is creditworthy,” Wooten said. “In fact, the City of Chicago Department of Housing maintains a list of participating lenders that support their down payment and closing costs assistance program.”
So, to echo Wooten, don’t give up on your dream of buying a home because of the word on the street. And don’t let a few bad apples in the lending community turn you off from banks altogether, Wooten warned. “Be informed and check these banks out,” she said. “You’re still better off with a bank.”
Cheryle R. Jackson is the president of the Chicago Urban League. She can be reached at president@thechicagourbanleague.org.
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