Closing with Confidence

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Affordable Homes South Texas, Inc Demystifies the Homebuying Process

Homeownership is still the American dream, and after the housing crisis of recent years made it seem like an unattainable one, Affordable Homes South Texas, Inc. (AHSTI) is helping it become a reality for South Texas families. AHSTI is a nonprofit organization with the goal of demystifying the home-buying process, helping potential home buyers understand it from beginning to end.  AHSTI has developed a unique structure and digital plan of action to equip their clients with education to guide them through decisions that will result in the move into a home. Some of the services AHSTI counselors offer are targeted at individuals with obstacles keeping them from getting approved for a home loan, but Myra Martinez, Director of Operations and Communications, says everyone can benefit from financial fitness counseling or homebuyer development courses, which are open to everyone. “Even if you’re certain that you will be approved at the bank, you can still make yourself a savvy consumer so you feel confident at the table when you’re closing,” she says.   

“We’re forward thinking,” says Martinez, explaining the financial structure that sets AHSTI apart and allows it to provide the many functions it does. A stream of additional revenue comes in from limited liability companies created under Tu Casa  Investments, Inc., a for-profit company created to offset the non-profit’s costs and prevent the laying off of employees when grant funding becomes limited. The LLC’s that fund AHSTI include HCH Realty, their real estate division, a construction company called Framework Homes, and a mortgage company called Spirit Mortgage is under development. Affordable Homes South Texas, Inc. also owns the Blimpies Sub Shop in Weslaco. “We are in the sandwich making business as well,”  laughed Martinez, who has been with AHSTI for going on four years. “Our boss is very creative.”

The structure provides the extra benefit that AHSTI is are able to serve two markets: those making 80% of the area median income and below, as well as those outside of the AHSTI loan product income-restricted range.  Always looking for ways to make the process smoother for the customer, AHSTI has embraced technology to create a win-win for all. With AHSTI’s new NeighborWorks® Compass, a website that allows potential home buyers to learn their affordability range based on preliminary information they enter, AHSTI also provides a resource that answers frequently asked questions, allows them to book appointments and even take some classes online. “Eventually we want to link our realty listings to the page, so once you know your affordability range you can browse the listings if you want to go through our real estate entity,” says Martinez.

The back end of Compass is a system called Salesforce, which has previously been used almost exclusively by for-profit companies. Together with a network of 25 affordable housing organizations called Neighborworks® America, they pushed for the development of a non-profit module tailored to them.  “We were the only ones in Texas that worked on developing this product,” says Martinez. “We’re very excited to be using it for the first time. We’re the guinea pigs, but we’re also making it what it’s going to be.”

Compass has already proven to be a benefit for the organization since its implementation in September.  Allowing the customer to directly interact with the digital triaging system creates efficiencies that allows the counselors to see more clients and lead more classes.  Martinez explains that before Compass, it was typically a two to three month wait before clients could review their financial information with a counselor, and it was inconvenient for those with inflexible work schedules. “They would have to take off around three whole days of work: one for orientation, and if they were ready for lending that’s another appointment or two,” she said. Now that they can do everything online before the actual appointment, clients are able to schedule the appointment within a more reasonable timeframe and only have to take one day off, removing an obstacle from some customer’s path to homeownership.”

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There is a small population which doesn’t have internet access or understand how to navigate the technology, but the number of these clients is more manageable since it went live. About 327 people have used the system to start their home buying process, but going digital has had another positive side effect.  “Before, the average age of the clients going through our system was about 35,” said Martinez, and shared an observation that in recent years, it seems that many millennials do not want to be (or think they cannot afford to be) homeowners. “All of our rentals are occupied; there’s a waiting list for them, and it’s usually the younger demographic,” said Martinez.

She hypothesized that they are likely basing their decision to rent on what happened in the housing crisis. “Some banks and mortgage lending companies made loans they knew they shouldn’t be making,” explained Martinez, and when many people foreclosed, homes didn’t look like such an investment anymore. In attempts to regulate the burst bubble, the Dodd-Frank Act created the Consumer Financial Protection Bureau to be the advocate for the consumer and regulate lending. With the new regulations in place, they don’t expect a repeat of the housing crisis, and the Compass data suggests that millennials are interested, although perhaps apprehensive, when it comes to owning homes. In November, the majority of Compass users were in the 18-24 age bracket, and a lot of the usage was coming from mobile phones, which Martinez finds encouraging as well. “We’re reaching people wherever they are that way. We’re trying to embrace technology and harness it for the good.”

First time home-buyers are definitely the bulk of people who they see, and Martinez says AHSTI pushes education as hard as they can to help them not go into the process blindly. “We always say begin at the class,” Martinez said, referring to the eight hour homebuyer education course usually offered on a Saturday, or in the format of four hours over two days which provides information not specific to the AHSTI product, but about the process in general.  Aidee Castro, homeownership standards manager at AHSTI, says the course offers a comprehensive breakdown of the process from beginning to end, starting with the steps needed to make the purchase and the roles of the different people they will be working with (realtor, appraiser, surveyor, title insurance escrow officer, among others).

“We talk to them about the first step: taking a look at their income and see what they can afford. Then we ask them to visit a lender, either a bank or mortgage company,” says Castro. The class teaches what to ask your lender, about the loan documents,  and what to be on the lookout for- high interest rates, other fees they might be getting charged. “We try to make them aware of what services they can shop for to keep their closing costs low,” Castro explained.

Castro says AHSTI encourages their clients to not look at houses until they know they’ve been approved for a loan, so they know the range of the houses they can afford. After they’re qualified, the realtor will take it from there. Castro recommends potential home buyers with their eye on a property to do their research on the house: drive around at night and on weekends if they don’t want to live somewhere there’s a lot of noise to see what it’s like at its busiest, and request records from the police department (if they have any for that neighborhood) about how many and what kind of incidents have been reported.  These are important things that people don’t think of in the excitement of home-shopping.  “You’re just looking at the house at that point,” she said, and exteriors can be deceptive. Because interior repairs can be costly, she recommends clients have an inspector take a look at the house if they buy an existing home.

If a client is in love with a house in need of major work, Castro says there are a few types of loans that allows them to do so. Current homeowners who haven’t made repairs for lack of funds, can also consider talking to their lender, even if they’re not AHSTI homes, to look into a rehab loan.  However, Castro doesn’t recommend it for a first-time buyer, unless they’re a true lover of fixer-uppers and DIY. “You won’t benefit from homeownership until long term and that makes it hard. You’ll find yourself wondering, ‘When am I going to be happy in my home?’

Because most homes will need minor repairs at some point,  Affordable Homes South Texas, Inc. also has a post-purchase class, where they teach homeowner repair and maintenance. “We show them how to repair holes in sheetrock and simple things they can do themselves that will save them some money,” said Martinez.  Another class offered is financial fitness bootcamp, which helps clients get their finances under control.  To access the schedule and register for a class, visit www.ahsti.org and make a profile on the Compass.

The classes are a whirlwind of information, but afterwards, clients know where to begin: whether they have degrees, debt, good credit, none or all of the above, anyone who’s looking to buy a home can get help from Affordable Homes South Texas, Inc. Pre-purchase counseling is the next step for all potential buyers after the buyer education classes.  Through one-on-one meetings, a AHSTI counselor aims to help the client remove obstacles keeping them from homeownership. Although Martinez is happy to see more young people signing up on Compass, she said they’re also seeing a lot of people who aren’t paying into their student loans in the same age group, which worries her as this could develop into one such obstacle down the road.

Not finding jobs related to their major and on the hook for a loan, Martinez said they see a lot of people with degrees still holding minimum wage jobs, which isn’t enough to make a dent in the debt. “They’re either in default or have deferred it and keep deferring in hopes that it will be forgiven, but the odds of that happening are not likely.”  This is especially unfortunate because it’s standard in the industry that student loan debt is taken into account when lenders calculate total debt ratio, and defaulting on loans also negatively affects credit score.  Your credit affects so many aspects of your life, from insurance rates to job offers, (according to Martinez, a lot of employers run credit checks) and a higher credit score can get you a better interest rate on cars, credit cards, and of course home loans.  

“Our AHSTI product,which is specifically for anybody earning 80% of area median income and below, depends on family size and credit pattern or behavior, not score, but a lot of other loans out there do have a minimum credit score,” says Martinez.  “The last thing you want to find out when you start your home ownership process and they pull your credit report, is that you have a very big mountain to climb.”  Because of the importance of credit, Martinez encourages everyone to pull a credit report once a year. “They can do it for free off of annualcreditreport.com,” she said, stressing the importance of making sure no one is using your information, or stealing your identity. If you are a victim of identity theft, Martinez says it is imperative to file a police report to minimize the damage to your score. The report is also valuable in that it allows you to check for mistakes in your records.  “If they’re reporting you late and you’re not, find out why. Maybe you need to send your payments off a day earlier (if you’re sending it by mail).”

 

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Credit counseling teaches clients how to improve their credit, and financial counseling helps them manage their money better and start to save.  They recommend that even though it’s difficult, that every individual start saving if they aren’t already, even if it’s as little as $50 a month.  “If you get into a bind, you have that extra reserve and don’t have to make a choice between the mortgage or whatever emergency may come up,” says Martinez.  “You just never know what’s going to happen.” To help them learn to save, counselors work with the client to set a small, comfortable goal at their first meeting instead of immediately shooting for the large, final goal. Martinez explains that it may seem unachievable to some, so instead, they encourage them to do it in smaller pieces usually over the course of a month, between counseling check-in’s. “Say someone has to save $2,500 – that might seem like too much, so we’ll say, ‘OK, do it in little notches; save $100 first, and once you have that let’s move up to $500.”  The duration of these one-on-one meetings depend on the obstacles keeping the client from their home purchase. Some are short term, with the client only having to pay off a few debts, but others have been with them for three or four years because they have a lot of debt, but are committed to paying it off. “They stay with us as long as it takes and once they’re ready we can help them make their dream come true, and go into it debt free,” says Martinez.

After clients are well-informed on the process, counseled, and ready to move forward, they don’t have to look further than Affordable Homes South Texas, Inc. The non-profit offers several services home buyers require. “We have our lending and home products; we finance and service all our loans, and we build,” explains Martinez. “Our homes are Energy Star certified and we currently have 19 subdivisions in seven cities. Our smallest home is two bedrooms but it’s rare we use it; we usually build three and four bedroom homes, which usually takes three to four months to build.” The entire process can take up to eight months if there are no complications or obstacles keeping the client from getting approved for a loan. But for many AHSTI clients, the American dream is worth waiting for. “Homeownership is still an investment; it’s the only thing that will keep appreciating,” says Martinez. “We just have to be a little wise about it.”