YOUNGSTOWN, Ohio – “Down payment is one,” says Daniel Harp, senior vice president, lending, at 717 Credit Union. “The main thing is credit score.”
There are programs to help people who need assistance, including younger people.
“There are a lot of programs that young people don’t actually know or realize about,” Harp says. “For instance, you can get a VA [Veterans Administration] mortgage if you were in the military with zero down.”
A Federal Housing Administration loan has a minimum down payment of 3.5%, Harp points out. That type of loan though includes a different house appraisal process that some sellers may shy away from.
“It’s more detailed and it’s more directed at the seller,” Harp says.
A secondary market loan through Fannie Mae or Freddie Mac requires 5% down, but if a buyer puts less than 20% down for a house, they’ll be charged private mortgage insurance.
“As you put the least amount down, PMI is going to be more expensive,” Harp explains.
Assistance
Closing costs are another expense and 717 is offering help for employees of its workplace partners. The credit union is paying the closing costs up to $3,400, he says.
“We’re going to cover those costs, so that helps,” Harp adds.
The credit union also is working with Youngstown to offer programs for homebuyers and homeowners and for homeowner improvements in Warren.
Alex Micco started taking real estate classes while he was in high school and got his real estate license shortly after graduation.
Two years later, he’s a real estate agent with the Holly Ritchie Team KW Chervenic Keller Williams Realty and he’s sold homes to several friends. But not all of his contemporaries share Micco’s real estate and financial acumen.
“A lot of my friends went into the trades so within just the last year and couple months even, they’ve been reaching out to me to purchase homes, which has been pretty nice,” Micco says.
The first thing he advises a prospective homebuyer to do is get preapproved. To do that, someone should work with a mortgage broker like those at a bank, he says.
But a prospective homebuyer’s credit score will contribute to their ability to get preapproved and to secure financing.
Credit History
Marlin Palich, general manager/principal broker at Berkshire Hathaway HomeServices Stouffer Realty, acknowledges some young people don’t have a credit history.
He suggests they get a credit card with a low maximum balance, like $500, and then make sure to pay it off. Rent and utility payments may also help build good credit, provided they’re paid on time, Palich says.
“One of the things they should do is talk to a licensed real estate person,” he says, adding that his company offers a program for first-time homebuyers.
Palich, who marks his 47th year in real estate this year, says talking to a lender is a crucial step in the homebuying process.
“Maybe there are special programs,” he says. “In some cities, you can get assistance for down payments and things like that.”
Palich suggests a young person considering a home purchase consult with a loan officer or adviser to determine how to proceed. That person may point out things the individual needs to clean up on a credit report and make other suggestions.
The Down Payment
Donald E. Fatobene, vice president, senior mortgage sales manager, at Farmers National Bank, echoes the importance of good credit when buying a home.
“The second thing that tends to be kind of a hindrance, is down payment,” he says.
A young person may look to a family member for help.
“There are some programs out there,” Fatobene offers. “The one that’s a big one in the state of Ohio, there’s something called the Welcome Home funds. That is a down payment assistance program that usually comes out sometime in the spring, usually sometime in March.”
Those funds are limited though.
The U.S. Department of Agriculture also offers assistance programs in certain areas.
“So, what we really would try to do is sit down with that individual,” Fatobene says. “The first thing that we want to look at is their credit. Then we want to look at what they have available to them down payment-wise. And then if they don’t have that down payment available, try to put them in a position where they are looking at whether there’s down payment assistance programs.”
Knowing If You’re Ready
Harp from 717 says the credit union has loan originators who sit down with prospective homebuyers and review all of the variables.
That involves an individual’s income to debt ratios. It includes all debt – house, car, student loan payments, credit card debt.
“When I’m referring to house payment – and this is the thing that young borrowers don’t understand – that’s not just for making the principal and interest on the debt,” Harp explains. “That includes your property taxes. That includes your homeowner’s insurance.”
If the down payment on the house was less than 20%, it also includes the private mortgage insurance cost.
When a homebuyer asks Fatobene at Farmers the monthly payment they can afford, he asks them what the payment is they’re comfortable making.
“We tell them, forget what the bank tells you can afford. You’ve got to be the one that makes that payment,” he says.
As the Mahoning and Shenango valleys, and most of the country, deal with a shortage of available, affordable housing, people are buying homes later. The average age of a first-time homebuyer last year rose to 38, up from 35 in 2023, according to the National Association of Realtors. In 1981, the average age was 29.
Harp points out that owning a home comes with maintenance costs too, such as a lawnmower or a furnace or appliance that needs to be replaced. If someone is buying a house after living in an apartment, they may have to pay to furnish more rooms.
Micco from Keller Williams says once a prospective buyer secures preapproval, the next step is to start looking for a home. He urges them to pay attention to a home’s foundation, roof, plumbing and HVAC and electrical systems. A home inspection is another expense a young house hunter may not have considered. But Micco says it’s worth the cost as it can find problems that could cost much more to fix later.
“I 100% recommend home inspection,” he says. “It’s worth the investment.”