With interest rates and home prices continuing to rise, millions of potential first-time homeowners struggle to find a way to qualify for a mortgage loan and afford their first home. And these potential first-time home buyers will continue to face plenty of obstacles in 2019.
Part of the problem has been a lack of affordable housing. Although Realtor.com predicts modest gains in housing inventory next year, mortgage rates are projected to continue climbing in 2019, making monthly mortgage payments higher and putting homeownership out of reach for more people.
Of course, in many parts of the country, increasing home prices indicate rents will be rising, too. Rent costs in the third quarter of this year were up 2.9 percent compared with a year ago, according to RealPage, a real estate analytics firm.
Still, many millennials are forming households and want to purchase homes. And low- and moderate-income families want to buy homes where they can raise families in a stable neighborhood, send their children to good schools and be part of a community. So how can these potential homeowners accomplish their goals?
When times get tough, people get creative. One option that has been increasing in popularity recently is lease-to-own programs. During the housing crisis, problems with certain programs that failed to deliver what was promised to consumers prompted changes in regulations and housing industry oversight.
Today there are different variations of these programs, so it’s critical that you carefully research each opportunity, and the company extending the offer and review the specific terms of any proposed housing program or agreement. Make certain the claims the owner or property manager is making are credible and all details discussed are written into your contract. Also check out their standing with the Better Business Bureau and other regulatory bodies to see if there are complaints and how these were resolved. Understanding your rights and responsibilities is key to a successful lease-to-own transaction.
HLP recently partnered with Trio, a national lease-to-own company, to provide coaching and outreach to residents. Trio’s goal is to provide a path to homeownership that is affordable and sustainable. By leasing a house that a person can eventually own, Trio gives potential homeowners the time needed to properly prepare for homeownership. In addition, leasing allows a family to make certain they like their neighborhood and begin building home equity that can be used toward the purchase of a home.
To qualify for Trio’s lease-to-purchase program, people must meet certain qualifications. For example, anyone applying to lease a home must have a credit score of at least 580, and a household income of $3,600. Their monthly lease payment cannot exceed one-third of their income. There is more about qualifications at the Trio website, www.thinktrio.com.
HLP oversees a comprehensive program that provides coaching, education and support during the lease and the first year of homeownership for people with a lease-to-purchase option with Trio. These households will receive monthly contacts and scheduled check-in calls to help the family prepare for homeownership and workout any problems.
Credit.org, a HUD-approved nonprofit agency, provides the coaching and support, which is free to the lessee and covers topics such as how to build a budget to pay for all expenses, maintain the home and save for other needs. They also have access to HLP.guru, HLP’s app to improve their credit score, borrowing capacity and address other qualification barriers.
When a person leasing a home believes they are ready to buy, a nonprofit housing coach will meet with the family to conduct a financial readiness assessment to determine if they are financially able to buy and sustain homeownership. A counselor will determine if the prospective homeowner’s credit score, debt-to-income ratio and finances meet the requirements needed to qualify for a mortgage loan. If they aren’t ready yet, they will create an action plan to address any gaps or resolve problems.
And after a person purchases their home, HLP will provide 12 months of post-purchase outreach and support to make certain they successfully transition through the first year of homeownership.
Challenging times call for innovative solutions. People interested in homeownership should closely review lease-to-own program as an option to consider in the home buying process.
Mark Cole is Chief Executive Officer of HLP, a nonprofit mortgage technology company based in Baltimore. HLP ’s web portal is a one-stop technology solution to help homeowners nationwide ensure that critical documents from distressed homeowners reach mortgage companies. To find out more about HLP’s services, visit www.hlp.org.