Homework for first-time buyers

The years 2020 through 2022 should see 8.3 million first-time homebuyers if they take a crash course in mortgage options.

Oh, and a steady job market, limited homeprice increases and low-interest rates will help, according to credit company Transunion, which surveyed 943 hopeful first-time buyers.

Fifty-eight percent of respondents said their primary obstacle was not having enough money for a down payment or monthly mortgage payment. And, half of those believed they needed a down payment of at least 10 percent to 20 percent of a home’s price.

This is not true, according to the National Association of Realtors, which finds that first-timers typically make just a 6 percent down payment.

The disconnect is understandable since most publicity on mortgages assumes a 20 percent down payment, the threshold for borrowers to avoid paying an extra amount for PMI or mortgage insurance, observes Louise Mack, president of Prosperity Unlimited, a nonprofit housing counseling agency.

According to Reed Brunzell of American Portfolio Mortgage, the same agencies that make mortgage rules like the need for PMI when there’s less than 20 percent down also sponsor special mortgages like the Fannie Mae Homeready program.

Aspiring buyers at all income levels struggle to save a down payment, Mack points out. Still, another misconception is that purchase counseling offered by nonprofits (listed at hud.gov) is only for lower-income buyers. Counselors should be well-versed in how to access down payment help.

But becoming a successful homeowner involves more than putting together a down payment, Mack says.

Buyers need a clear grasp of how owning impacts their budget, including making repairs and paying utility bills that they previously left to a landlord.

A clear view of homeownership goes both ways, Brunzell points out. “I show (buyers) their bottom line … what their home costs after they deduct mortgage interest and property taxes.”