A Lesson on Philadelphia Home Ownership Issues and Policies for First-Time Buyers
By: Nick Santangelo
Buying your first home can be an intimidating process that raises a ton of questions. How much money do you need for a down payment? What info do you need from your realtor and your lender? What tax programs can help you? What state and local policy issues affect homebuyers?
To answer those questions and more, the College of Liberal Arts’ Master of Public Policy program, in conjunction with Temple University's Real Estate Institute and civic engagement organization Young Involved Philadelphia, held a Home Ownership 101 event at Temple University Center City on Sept. 26. Attendees spoke with representatives from about a dozen banks, lenders and independent firms that work with mortgage and housing policies. Among those who guided new home buyers and those curious about home-buying policy were realtor Matt Aragona and mortgage lender Diann Tyler.
One of the first questions addressed was particularly relevant to students: what type of credit history do you need to buy a home? Tyler, who serves as president and mortgage loan originator at Everest Home Mortgage, LLC, made clear that student loans aren’t enough. To buy a home, it’s best to have a varied credit and loan history. Employment status matters too, with part-time workers and 1099 freelancers needing to prove their work and pay history for two full tax cycles to get approved.
But before even reaching that step, recommended Aragona, who is CEO and realtor at Aragona & Associates, buyers need to think about what type of home they want to buy. A fixer-upper might be available at a discounted price, but buyers should either be handy themselves or know good contractors who are if they’re not going to purchase a move-in-ready property. Asked if there was funding available for those purchasing a fixer-upper, Aragona mentioned the FAH 203K loans to help cover construction costs, but he recommended using as much cash as possible.
“Obviously, you want to have cash on hand if possible,” said Aragona, “that way you’re not paying interest on the cash.”
Buyers considering a fixer-upper should also think about long-term value, added Tyler.
“Very often, people build equity right away,” she explained, “and your realtor can help guide you: ‘In neighborhood Y a home that’s renovated might be worth X.’”
Whether purchasing a fixer-upper or a move-in-ready home, almost all homeowners need to take out a mortgage to complete their purchase. But how much of a down payment should they save up before borrowing the rest? Aragona recommends 20 percent of the equity (the property’s fair market value minus loan balances) of a home.
Put yourself on a budget, pretend you have a mortgage
First-time home buyers in Philadelphia can also benefit from the First-Time Homebuyer Grant, which provides up to $500 per household toward closing costs. Additionally, pointed out Aragona, the Homestead Exemption offers anyone who owns a Philadelphia property as their primary residence about $550 in savings on their Real Estate Tax bill.
Other than keeping these programs in mind and maintaining good credit, one student wanted to know what else she could do to prepare for buying a home within the next five years. Tyler told her to watch her spending carefully and make sure everything going into her accounts is traceable.
“Put yourself on a budget, pretend you have a mortgage,” said Tyler. “Put the money in the bank. When you apply for a mortgage, you have zero financial privacy from the day you apply until the day you close.”
The lender needs a paper trails so that it can pour over every deposit and expenditure with extreme scrutiny. Perplexed, the student asked why that was the case.
“It’s the collateral,” replied Tyler. “You’re putting five percent down? Big deal.”
The lender, she explained, has “more skin in the game” than the buyer. If there’s anything illegal or unreliable about how the buyer is making and spending money, the lender wants to know about it.
But what about after the home is bought? What happens then, and who can the buyer turn to for advice? Aragona stressed the importance of finding good contractors and maintaining and taking advantage of a strong relationship with the realtor even after the sale is complete.
”Anything you really need in terms of your house, you should always be able to contact your realtor,” he said. “The relationship with your realtor is easily as important if not more important after the sale is completed.”
Temple University’s Real Estate Institute offers non-credit coursework for students new to real estate. By completing the two introductory offerings, you’ll learn more about the work of a realtor and the process of buying or selling a home. You’ll also be eligible to become a realtor!