MILLVILLE — Entry-level home buyers are crucial to a healthy housing market, allowing existing home owners to move up and generate activity at all levels.
While federal tax incentives that sought to counter the housing slump by subsidizing such buyers expired long ago, those who haven’t owned a home in three years can still get help and take advantage of house prices and mortgage rates at or near all-time lows.
The best deals available in the region might be in Cumberland County, where the nonprofit organization Affordable Homes of Millville Ecumenical Inc., or AHOME, is combining state mortgage money with its own program to offer a like-new, three bedroom home for a total monthly payment (principal, interest, taxes and insurance) of $655 to $700 — about $400 a month less than local rental costs.
Donna Turner, AHOME executive director, said the organization has three such houses available, priced from $70,000 to $85,000.
“We would have had a lottery if there was more demand for the houses than supply, but we have more supply than demand,” Turner said.
On Tuesday, six would-be home buyers attended an AHOME counseling class to help them prepare for the house purchasing process.
The class covered the basics of what it takes not just to buy a house, but to ensure that the end result is an improvement in their financial condition.
“The more you know about buying a house, the less likely you are to buy something that you can’t afford,” Turner told the class.
Many lenders and programs require such pre-purchase education for home buyers now, she said, to help avoid a foreclosure crisis in the future.
Class participants weren’t just interested in AHOME’s houses. One woman had made an offer on a house that day and wanted to brush up on her understanding of the process so she could avoid making a costly mistake.
Turner handed out a “Bill Paying Organizer” and talked about the four Cs a home buyer needs: cash, character, capacity and credit.
Basically, those include enough money to put into the purchase to give the buyer a stake in the home, enough room in the monthly budget to pay for the house, and evidence that the buyer has made loan payments reliably enough in the past.
In AHOME’s case, the “earnest money” or down payment can be as little as 1 to 3 percent of the house price, she said.
Buyers also need a credit rating of at least 620, Turner said, not very high on a scale that runs from 300 to 850 and is skewed to the upper half (60 percent of people have credit scores between 650 and 800, according to myFICO.com).
Time spent working and prior loans that were paid on time are helpful in establishing the character part, she said.
Turner, 55, of Deptford Township, said a family of four can earn as much as $55,987 and still qualify for the housing aid, “so at least 95 percent of Cumberland County residents would qualify.”
After the class, Ed Einhaus, project coordinator for AHOME, led a tour of one of its available houses.
Like the others, it was fully renovated — new siding, windows, roof, interior — with a grant from the state CHOICE program (Choices in Home Ownership Incentives Created for Everyone) and a local bank loan to be repaid upon sale of the house.
“This cost more than $100,000 to rehab, and we’re selling it for $71,000,” said Einhaus, 58, of North Wildwood, “so it’s quite a deal.”
Turner said there was enough interest in the pre-purchase class that another has been scheduled for 6 p.m. Aug. 21 at AHOME. Call 856-293-0100 to register.
The low number of first-time home buyers remains a problem for the housing market and its budding recovery.
Such buyers accounted for 32 percent of U.S. home purchasers in June, 34 percent in May and 31 percent in June 2011, the National Association of Realtors said.
“A healthy market share of first-time buyers would be about 40 percent, so these figures show that tight inventory in the lower price ranges, along with unnecessarily tight credit standards, are holding back entry-level activity,” Lawrence Yun, chief economist for NAR, said in a statement accompanying the research.
Entry-level inventory should be helped by the second wave of foreclosures that will crest late this year or in 2013, as courts in New Jersey and other judicial foreclosure states remove restraints on foreclosure processing and release the backlog of distressed properties.
For 2011, first-time buyers made up 37 percent of home purchasers, which was down from 50 percent in 2010.
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