Life Kit: How To Find The Right Mortgage
MICHEL MARTIN, HOST:
Home prices have been rising, and that's led a lot of people, especially younger people, to think they can't afford to become homeowners. But interest rates on 30-year fixed mortgages are down around 3.5% which is historically low. NPR's Chris Arnold from our Life Kit podcast explains how, if you find the right mortgage, becoming a homeowner might not be the impossible dream.
CHRIS ARNOLD, BYLINE: Deirdre Douglas (ph) had just bought this house in Charlotte, N.C., but it was touch-and-go, and so she didn't tell her kids. And when they pulled up to the house together, she really wanted to surprise them. So she told them, look, this is just like a friend of mine's house. I just got to pop in for a minute.
DEIRDRE DOUGLAS: And just played it off like, oh, my goodness, she's not here. Oh, I forgot she left me the key. And so I was like, let's just go in. You guys can come in with me. And they were just like, who's house is this?
ARNOLD: Then they saw the banner that Deirdre put up over the fireplace welcoming them home to their new house. Deirdre was taping this on her cellphone.
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UNIDENTIFIED CHILD: Are you serious?
DOUGLAS: And that's the moment. They just lost it.
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UNIDENTIFIED CHILD: Yay. Thank you, Mommy.
DOUGLAS: Girls, welcome home. Oh, my baby girl.
ARNOLD: And this moment is brought to you by a mortgage. And actually, Deirdre was able to buy this house because she found a kind of loan that most people don't even know exists.
ELYSIA STOBBE: I mean, it's amazing what's available if you just look and ask.
ARNOLD: That's Elysia Stobbe. She works for the mortgage company out of Florida called NFM Lending. And she's written a book on how to get a mortgage. She says one big misconception out there is that a lot of people still think that they can't buy a home because they can't get a mortgage if they don't have a 20% down payment.
STOBBE: There's great first-time homebuyer programs where you can put down as little as three or 3.5%. There's also loans that have 100% financing in certain parts of the country, so that's 0% down.
ARNOLD: And look. These are not like the crazy risky subprime-type mortgages that helped cause the housing crash. For example, one popular mortgage is called an FHA loan because it's backed by the Federal Housing Administration. And you only need about 3% down for that loan. In Deirdre's case, she'd gone through a divorce. And she ran up some credit card debt just to make ends meet with the kids. But she had a good job, and she was getting back on her feet. And a friend told her about a first-time homebuyer program. And so she signed up.
DOUGLAS: It was a tedious process, but the end result was amazing.
BRUCE MARKS: We don't look at someone's credit score. And she could afford the payment.
ARNOLD: That's Bruce Marks. He's the founder of a nationwide lender called the Neighborhood Assistance Corporation of America or NACA for short. And basically, Bruce has dedicated most of his life to making loans to everyday working people on moderate incomes so that they can become homeowners.
MARKS: And what we believe in is called character-based lending, which is what we used to do in the past. You look at people's individual circumstances that they control.
ARNOLD: So it's not about the credit score. It's about, are you paying your rent and your bills on time? In Deirdre's case, to get that loan from NACA, she had to take that homebuyer class and demonstrate over time that she was saving money. And she paid $11,000 of credit card debt.
DOUGLAS: And so you meet with a credit manager. And they will just sit down to go over every single expense that you have. It was very hard, but I did it. And if I could do it, anybody can do it.
ARNOLD: Your state's Housing Finance Agency can usually tell you about good first-time homebuyer programs in your area. Deirdre got a below market interest rate with a low downpayment, and she doesn't have to pay mortgage insurance. And Bruce Marks says going through a homebuying and budgeting class like this will help you figure out if becoming a homeowner at this point in your life is a good idea. Chris Arnold, NPR News.
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MARTIN: You can learn a lot more about mortgages and homebuying from our NPR Life Kit podcast, which you can check out at npr.org/lifekit.
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