How to buy a home if you’re not rich

I want a house. I dream of buying my own home: one with a garden space, an airy kitchen with windows, open rooms with high ceilings, friendly neighbors, and a place for a dog. In my apartment building, neighbors’ beds thump against the walls at night; their stereos rattle my china; and their cigarette smoke wafts into my living room through the heating ducts.

But as a homeowner, I’d be free of all that. I’d become a real tax-paying citizen who could complain to the mayor about potholes and zoning at those marathon City Council meetings.

Call it my American dream. But in Asheville, home prices continue to rocket upward, outpacing my modest reporter’s salary the way the Roadrunner zips past Wile E. Coyote. Meanwhile, I remain in the ranks of those county residents who earn less than the median income ($31,600 for singles, $45,200 for a family of four). Roughly 44 percent of Buncombe residents earn 80 percent or less of that median figure, according to data from the U.S. Department of Housing and Urban Development.

For us, an “affordable” home is one in the $80,000 range, at most.

But the average cost of the homes sold in the Asheville metropolitan area during the first half of this year is more than $160,000, according to the Asheville Board of Realtors. That’s way out of reach for those of us in the middle or below. Sure, that figure is skewed by the high-dollar houses, and yes, there are plenty of cheaper ones in some rural areas and in Asheville’s more modest neighborhoods; but to the uninitiated, it’s a real-estate jungle out there.

So I sought help. No, I didn’t drive to Georgia to take a chance on a $135 million lottery, nor did I wait for some rich relative to die (I don’t have any). Instead, I signed up for the Affordable Housing Coalition’s Homebuyer Education Class, a 12-hour course that takes one month to complete.

“It’s like a crash course on how to buy a home,” says Asheville resident Kyla Palmer (not her real name), a nurse and single mom with four children at home. She took the class last year and will move into her own home later this summer. “I didn’t know anything about buying a home. I went in there knowing nothing except where the class met,” she says. With her modest income and limited credit history, Palmer wasn’t sure she could afford to buy. “I was thinking you needed $5,000 to $10,000 of your own cash [to buy a home], which I didn’t have. But I learned you can do it for less than that. And the class gave me some insight into all the programs available for people like me.”

Combining a bank mortgage and a deferred home-improvement loan through the city of Asheville, Palmer bought a West Asheville fixer-upper with enough room for everyone in the family. “It was somebody’s nice Christmas present — mine,” she says about closing the deal last December. “I got a house!”

“My favorite thing about doing this is helping people who wouldn’t become homeowners otherwise,” says Helen O’Connor, the AHC’s homeownership educator. She has taught the class for the past four years and estimates that more than 300 low- and moderate-income county residents took it in 1999 alone. By 2001, 45 percent of those course graduates will become homeowners, she calculates, based on past years’ results. Still, those happy endings aren’t automatic, O’Connor emphasizes: “The people who are successful are the ones who educate themselves and take steps to achieve their goals.”

Information central

Debbie McCoy says she heard about the class through a co-worker at Project Access, a health-care program for low-income county residents. “I knew I wanted out of my mobile home and into a house. But first, I wanted to make sure I learned as much as I can,” McCoy recounts.

The course covers all the steps it takes to buy a house, says O’Connor. There are sessions on understanding your credit report, saving and budgeting to afford a home, choosing a realtor, working with lenders, avoiding predatory-lending traps, getting a home inspected for major problems, negotiating with sellers, surviving all the paperwork — and holding onto your home once you’ve got it, she explains.

McCoy, who took the class this May, remarks: “I learned more than I thought there ever was to know about buying a house. I was most impressed by the number of options available to first-time buyers.” Several programs require little or no down payment and allow debt-to-income ratios significantly higher than with traditional mortgages, she points out. “I learned that, despite my husband’s bad credit record and our modest income, we could still qualify to buy a home.”

Classmate Bill Smith echoes her assessment, saying, “The most valuable aspect of the class was finding out that, with my salary, it’s possible to get a house.” Both Smith and his partner, Stephanie Morgan, work in social-services jobs at salaries well below the local median. “The class was very helpful, just in showing us what choices we do have for buying a house. It’s not as intimidating anymore.”

For her part, Morgan notes that she “appreciated the nitty-gritty aspects” of the class — tips on how to pick a realtor who’ll help you find the best deals, getting full disclosure from the seller on a home’s condition — and paying a home inspector to double-check before you close on the deal.

“We’re not ready to buy,” she reveals, joking, “We don’t have a parental trust fund in waiting. But this course has prepared us, even if it’s a few years before we buy.”

Sticker shock

Despite the abundant information available through the AHC course, at least one major obstacle to homeownership remains for low- and moderate-income residents.

“The cost of housing here is a big problem,” says AHC Homeownership Assistant Geraldine Melendez. “I’ve had clients who have good jobs, good credit — and they can’t find a place in their range. Also, low- and moderate-income residents tend not to have money for down payments and closing costs. But that we can work with,” she says.

“I was amazed at the prices,” McCoy reports about her early attempts to find a home. Friends of hers in Stone Mountain, Ga., recently bought a three-bedroom, two-bath home with almost 2,000 square feet of living space for about $130,000. “Try finding that in Asheville,” says a dismayed McCoy. She also mentions that her husband could make much more money in Seattle, where the couple will probably relocate once he finishes his course work at A-B Tech. “I’d love to be able to live here, but it’s not going to happen.”

“This is one of the most desirable places to live in the country. A large number of people want to move here. That’s what drives the market price,” explains local real-estate manager Tom Leslie. But that high desirability also gives those who do manage to buy a very good investment, he argues. “If you can find a fixer-upper and get into it, you’re going to enjoy appreciation [of your property value] every year.”

That’s if you choose your home carefully, O’Connor cautions. In one class session, she warned participants to consider every aspect of both the home and the neighborhood they’re thinking of making their own. Find out how the property is zoned; meet the neighbors; and research what, if any, nearby developments might affect the property, she urged. Young homebuyers in Swannanoa thought they’d found their dream house last year, she reports. “But, shortly after they moved in, the Department of Transportation widened their road. They didn’t know. They didn’t research it, and they lost half their front yard,” O’Connor recounts.

Like McCoy, Morgan found home prices in the Asheville area a bit discouraging. Yet the class, she says, gave her a valuable perspective: “There are big price differences for houses in different parts of the city. But I learned there are lots of little tucked-away places where we could find something in our range.”

In the May 20 class session, we took an affordable-housing tour that showed us the possibilities. O’Connor showed us a “classic fixer-upper” off Martin Luther King Drive that was going for $60,000; Habitat for Humanity-built homes near State Street for which low-income residents can qualify; a condominium complex for moderate-income residents that’s being built off Clingman Avenue; new but modest homes in Leicester; modular homes; and renovated houses for sale by Neighborhood Housing Services and Mountain Housing Opportunities, two local nonprofits.

“Home means different things to different people,” O’Connor reflects. Some have the vision, patience and hard work to transform a fixer-upper into their dream abode. For others, a brand-new modular home in move-in condition fits the bill. For O’Connor, it was an old house in Montford that needed serious TLC several years ago: Like Palmer, she qualified for both a regular bank loan and a rehab loan that she won’t have to pay back unless she sells the house, or her income increases substantially. Knowing how quickly homes can move in Buncombe, O’Connor called the seller and made an offer before the house was even on the market. “Persistence,” she says, when asked how she pulled it off.

The bottom line

Meanwhile, after completing the course, I met with Melendez for the confidential, one-on-one counseling the AHC also offers potential homebuyers. “We look at everything a lender would in prequalifying you for a mortage,” she announced when I handed her my packet of credit reports, pay stubs and tax returns.

I leaned forward, holding my breath as she flipped through my credit reports. Two years ago, swamped with credit-card debt, I’d initiated a payment plan through the Consumer Credit Counseling Service, a national nonprofit with an office in Asheville. I was sure my rocky history would disqualify me for a mortgage for at least the next millennium or so.

But Melendez was quick to reassure me, saying, “Most lenders recognize that people who’ve been on such plans and kept up with their payments are rebuilding their credit.” She scanned my list of creditors. “Aside from the high amount you’re paying each month, you’re up to date on everything. That’s very good.” Anyone looking to buy a home, she suggested, should avoid falling behind in payments to credit-card companies, landlords and other creditors. “One 30-day-late in the last year is worse for your credit rating than a bankruptcy five years ago,” she remarked. I began to feel more hopeful.

But another major criterion for lenders is the applicant’s debt-to-income ratio. Using a worksheet that all class participants complete, she calculated mine. Given my income level, I could theoretically afford a mortgage payment of more than $700 per month. But factor in my high debt payments, and “That knocks you right out,” said Melendez. “Don’t get depressed about it, but you’re not ready.”

On my current payment schedule, it’ll take me another two or three years to clear up the debts. Must I wait till then to buy a house?

Not necessarily, Melendez replied. My income might increase, enabling me to pay my debts off faster. That’s what she advised me to do, along with submitting an explanation to the credit bureaus, so any lender reviewing my report would know I’m on the CCCS plan and taking steps to clean up my debts.

Speaking more philosophically, Melendez said of the housing market in the Asheville area, “Teachers, police officers … they qualify for special programs, because they make less than 80 percent of the median income. What does that say about our society? Many of the programs available to low- and moderate-income families are not charity. They simply make it possible for people to get their foot in the door and have a chance to own their own home. There are a lot of options and a lot of resources available to you.”

The Affordable Housing Coalition’s next Homebuyer Education Class is scheduled for August, running consecutive Tuesdays (Aug. 8, 15, 22 and 29) and meeting for a Saturday-afternoon home tour on Aug. 19. The fee varies from $10 to $55, based on income. For information, call Geraldine Melendez or Helen O’Connor at 259-9216.