For many Americans, buying a home is the biggest financial investment they’ll ever make. And more than half of Americans are homeowners — about 65% in 2021, according to the Census Bureau.
But many wannabe homeowners feel that goal is increasingly out of reach.
Housing prices in Middle Tennessee have soared from a median of $307,000 dollars in July 2018 to $490,000 currently, according to Greater Nashville Realtors. And now the interest rate on a 30-year mortgage is the highest it has been since 2008, based on data from FreddieMac.
Even people who already own a home can be overwhelmed by the cost of upkeep, taxes, insurance and utilities.
So what’s a current or prospective homeowner to do? WPLN News talked with some housing advocates for advice to help home buyers and existing homeowners in a hot real estate market.
Buying a home
1. Understand your financial ability and the lending process.
Buying a home for most people means getting a mortgage loan. So being clear and truthful about what you can afford and understanding how mortgages are financed is the place to start, according to Ralph Perrey, executive director of the Tennessee Housing and Development Agency.
“Is my credit score good enough? What’s my debt-to-income loan look like? I make this much money a year. How much house can I afford without overextending myself? And where can I find a house in that price range?”
THDA is a state agency that helps low to middle income home buyers, and Perrey says there are a wide range of residents who are eligible for mortgage assistance.
“A single person could be making as much as $113,000 to qualify for financing. A larger household can be making about $132,000. And that surprises a lot of people,” Perrey says.
“But we want people to know if you’re in this range and especially if you need some down payment and closing cost assistance in this time of rising prices, you ought to ask your lender about THDA mortgages and what’s involved.”
2. Get educated about the home-buying process.
Buying a home can be scary, as well as take big bite out of your wallet. Free home-buying classes are offered by THDA and several other housing agencies.
“It demystifies the process for you, so you know what you’re doing and why — how to handle your money, manage your credit. And when you do apply, you’re in better shape to qualify for that mortgage,” Perrey says.
THDA has the stats to back that up: a Vanderbilt University research project that reviewed its homeowner counseling program.
“What they basically found is the people that got the benefit of real homeownership counseling on the front end were 40% less likely to run into the kind of financial problems later on that put homeownership in jeopardy,” Perrey says.
3. Have a ‘cash cushion’ in addition to the down payment.
This will help with what’s known as the cost-burden of homeownership — things like home maintenance, unexpected repairs, insurance, utilities and property taxes.
“When you own a house, the water heater is going to crash, or you’re just going to have some other household emergency, like you need a new set of tires,” Perrey explains. “We want our borrowers to have a little bit of a cash cushion so that those kinds of things aren’t a financial crisis for the family.”
Keeping those costs, including mortgage payments, to under 30% of your income is what financial advisors recommend. If you still get overwhelmed by the cost-burden of home ownership, you might qualify for assistance with maintaining or rehabilitating your house.
“In some cases, those can be straight-out grants for, say, older folks or lower-income folks. We administer the Weatherization Program for the state and the Low Income Home Energy Assistance Program, LIHEAP. There’s a new program that the feds are starting up that we expect to launch later in the year that will help pay overdue water and sewer bills,” Perrey says.
Information about many of those home rehab programs is available through your local community action agency or one of Tennessee’s Development Districts, depending on where in the state you live.
In Tennessee, property tax help is also available for homeowners who are 65 and older, disabled or low-income.
Saving your home
If, despite all efforts, you can’t handle the financial costs of a house or get behind on mortgage payments, there are still options to help you keep your home.
4. Act quickly if you get a delinquent collection notice or a pre-foreclosure letter from your mortgage servicer.
“I understand you’re probably in this predicament, and you’re very stressed. And you just want to throw the notice in the cabinet and not look at it,” says Karin Morris, housing attorney with Legal Aid Society of Middle Tennessee. “Sometimes, you can call your servicer and make some arrangements for yourself, especially when you’re in that pre-foreclosure state.”
Loan companies are required to contact you if payments are behind and provide information to help you get back on track. Those are known as “loss mitigation” options — things like restructuring the loan or setting up a repayment plan. If you need help navigating the process, free housing counseling is available through several HUD-approved housing agencies.
5. Beware of ‘cash for your house’ and unsolicited offers claiming to help prevent foreclosure.
Morris says many of those offers are scams.
“You have people who are literally out here looking for people who are in the midst of getting their home foreclosed, and then, they promise that they can save your home from being foreclosed. But little do you know they are actually taking the title to your home. And you think you still have the title, but you don’t.”
6. The last resort…
If all else fails and you want to stay in your home:
“Bankruptcy is, you know, not an ideal option, of course, but it is there,” says Katie Ovalle, housing attorney with Legal Aid Society. “It would be worth having a consult with an attorney who specializes in that type of law to figure out whether or not that’s an option that could help you save your home.”
Marianna Bacallao contributed to this report.
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