Roundtable: Buying Your First Home
FARAI CHIDEYA, host:
This is NEWS & NOTES. I'm Farai Chideya.
Today we offer a special Roundtable on buying your first home as part of our real estate series. Moving from renting to owning a home can be thrilling, but as we heard earlier, financial predators look at first-time homebuyers as easy marks. The good news is that other organizations aim to make buying a home easier.
Joining us now is Marguerita Torres, the director of the Englewood, California, branch of the Neighborhood Assistance Corporation of America, or NACA. NACA works to pair low and middle-income homebuyers with low cost loans. Rose Alexander of Los Angeles just bought a home through the program. And Leford Hackett of Van Nuys, California, has almost completed the purchase of an apartment complex.
All three are gathered here at our studios at NPR West. Welcome.
Ms. ROSE ALEXANDER (First-time Homebuyer): Welcome. Thank you for having us.
CHIDEYA: So, Rose and Leford, let's start with your stories. Rose, when did you buy the home you live in and why did you decide to buy it?
Ms. ALEXANDER: I purchased my home in March 2006 and I decided to buy it because I had been renting it for 15 years and the owner gave me first opportunity to purchase it.
CHIDEYA: So when you got this opportunity to buy, what was the first thought that ran through your mind? Was it, oh this is great, or, oh my gosh, what am I going to do?
Ms. ALEXANDER: I actually said, oh my gosh, what am I going to do? And then I remembered NACA.
CHIDEYA: And how did they help you learn about the home buying process?
Ms. ALEXANDER: They take you step-by-step. Your initial step would be to go to a seminar and they basically give you an overview of what you're going to be faced with. And Marguerita Torres, the director, she will call you throughout the day and say, okay, this is your next step, this is what you need next.
And they're very in tune with their clients and they're very thorough with their program.
CHIDEYA: Can you describe to us what you loved the most about the house that you bought and what kind of house it is?
Ms. ALEXANDER: It's a duplex. It's old-fashioned. It's real comfy. And I know the ins and outs of that home.
CHIDEYA: Yeah, because you've lived in it. Well, Leford, you decided to buy a three-unit apartment building and you're going to live in one unit from what I understand?
Mr. LEFORD HACKETT (First-time homeowner): Correct.
CHIDEYA: So like Rose, you're going to be someone who's a landlord as well as someone who's a homeowner. Does that scare you?
Mr. HACKETT: It really doesn't scare me. I actually look forward to being a landlord and actually having the opportunity to live there. It does bring on some challenges, but I like the challenges and I'm really looking forward to it actually.
CHIDEYA: So looking at you, you incredibly young. How old are you?
Mr. HACKETT: Twenty-eight.
CHIDEYA: Twenty-eight, and you're going to be a landlord and a homeowner. That's exciting.
Mr. HACKETT: It is exciting.
CHIDEYA: Yeah. So what brought you to this process?
Mr. HACKETT: Well, initially I found out about the program through a friend. And when he explained it to me it just sounded like, hey this is like one of those too good to be true type of situations. But due to the fact I'm pretty inquisitive, I called the number and I got all the details and what I would have to do in order to begin the procedures. And I started from there and everything just worked as planned.
Once I went to that workshop, I was bought.
CHIDEYA: So, Marguerita, speaking of too good to be true, there's a lot of people who want to buy a house and a lot of different kind of ads about buying a house. Do you ever see people who come into your offices who've already been burned by some other, you know, by a scam, for example?
Ms. MARGUERITA TORRES (Director, NACA, Englewood, California): In terms of the members that come in that we service, they come from all different backgrounds. There might be some folks that are burned or have been burned, there might be some folks that have been looking for a while, are very knowledgeable, and there might be some folks that have just heard from a friend, have never purchased, and at this point are like babes in the wood. We really take care with every single one. And, yes, we do see a lot of people that have been burned by other programs. Absolutely.
CHIDEYA: So maybe you can give us some dos and don'ts or some tips for people who are just starting to look around.
Ms. TORRES: Well, the first thing that you have to do is not buy into the feeding frenzy that has brought us to this over-inflated market. You have to take your time and really do your homework and really do your research. And for heaven's sake, don't ever sign anything without making sure that you understand it.
That is the main don't that people that were burned encountered. They signed documents without understanding. They signed documents that have spaces that aren't filled in. And then they've got this craving to own their own home, they bypass a lot of steps that they wouldn't bypass ordinarily.
CHIDEYA: Leford, let me ask you this, how do people in your life feel about you buying an apartment complex at the age of 28?
Mr. HACKETT: As far as like my parents and my friends, they've really been happy. They're probably more excited about it than me. I'm really trying to stay humble.
CHIDEYA: So people support you in this. Do you think that you're going to try to get people you know to live in your house, because that's always a good and bad.
Mr. HACKETT: That was one of my first reservations. I don't want people that I know to live in the units at all. I just feel like it's sort of a conflict of interest. Sort of integrating personal and business.
CHIDEYA: You don't want to go with a baseball bat and collect the rent from your friends?
Mr. HACKETT: No, no, that's definitely what I want to do. That's the only reason that I don't want people that I know, friends, even family, to live in the units. But there's always an exception to the rule.
CHIDEYA: Marguerita Torres, your group really says that it does confrontational community advocacy, is that correct?
Ms. TORRES: Yes, that's correct.
CHIDEYA: Tell me how exactly that works?
Ms. TORRES: NACA has an interest rate that is one point below the prevailing rate for the lender that we use. We also have no down payment, no closing costs, no fees, and you don't even have to have perfect credit. That does not mean that you don't pay your bills, but we can point you in the right direction in terms of cleaning up your credit.
In terms of the confrontation advocacy part of it, Bruce Marks has done an incredible job of bringing this particular program that started in its infancy as primarily a confrontational group. And the way that it works is that he basically these lenders' feet to the fire. And he...
CHIDEYA: He, I guess, is the executive director?
Ms. TORRES: That's the executive, the CEO of our company. That's Bruce Marks. And Bruce basically has taken these predatory lenders to tasks. The most recent lender to come to the table was Citigroup, CitiMortgage. And basically after showing them the errors of their ways, they negotiate with him and that's where we're getting the money that we're dispersing to Rose and Leford, basically from confrontation.
CHIDEYA: Well, I'm sure that they wouldn't call themselves predatory lenders, so let's just make that clear. But what did you see as their failings before they came to the table?
Ms. TORRES: Exorbitant interest rates up to - and I'm not kidding when I say 24 percent. Most folks don't consider themselves victims of predatory lending. And yet when you ask folks do they have credit cards in their wallets, everybody raises their hand. Guess what? Predatory lending is alive and real and we encounter it at every level.
And most homeowners that lose their homes, lose their homes because of predatory lending. Let me just say on the side, most lenders qualify folks on their gross income and that's money that really never comes home.
CHIDEYA: Now, again, a terminology point. Gross income is before taxes?
Ms. TORRES: That's the money that they say you make but you don't bring home. After taxes, after the union dues, after everything else, you take home the net income. And that is what you really pay your bills.
CHIDEYA: Leford and then Rose, how is buying this home - or in your case, Rose, having brought this home - how is it going to change your month-to-month? You know, because most people I know who bought something they had to pay a lot more. And you know, just per month going out of their pockets, even though they're getting something back by having a home.
Leford, is this going to really just like force you to like, no more Fatburgers, no more, you know, whatever?
Mr. HACKETT: Actually, it's not, because once I decided to purchase the property I started practicing certain habits. So I've been saving money and doing different things and cutting in certain areas. So it's going to be -actually it'll be a pretty smooth transition for myself.
CHIDEYA: Well, tell me what areas that you've been cutting back on?
Mr. HACKETT: Well, for instance, I wanted to have all of my bills paid, so probably by August I won't have any other bills but the mortgage. And I work a lot so - I just cut all the credit cards, cut all the bills down there. I actually went and purchased me a bike yesterday because I was feeling like $400 a month for gas, and I don't even work five miles from my house.
CHIDEYA: So you're going to ride your bike to work to cut back on gas costs?
Mr. HACKETT: Yeah. And it'll help me with the exercising thing. Just cutting in small areas, you would be surprised how not going and eating fast food, you know, shopping for the month, those types of things alleviate a lot of unwanted bills.
CHIDEYA: And, Rose, what about you? Did you have to do some belt tightening?
Ms. ALEXANDER: The small, miscellaneous items that I used to pick up, I can now see that, you know, they're not needed anymore. But as far as my overall expenses, they've actually only changed about 10 percent.
CHIDEYA: And do you know how much equity you've built up over the six months or so that you've, or, I guess not even - I mean, do you have any idea whether or this was a good investment?
Ms. ALEXANDER: Yes I do. I actually have $175,000 in equity since I purchased the property.
CHIDEYA: Go ahead! That must make you feel good.
Ms. ALEXANDER: Yes, it does. Yes, it does. And I want to add, what really makes me feel good about purchasing this property is not only do I have a history there, but my mother once lived there. And I've purchased a property that she once rented.
CHIDEYA: Yeah, and do you hope to pass it on maybe to a family member or someone you love?
Ms. ALEXANDER: I'm passing it on to family, after it's paid.
(Soundbite of laughter)
CHIDEYA: So, Marguerita, it sounds like the issues that are facing first time homebuyers in particular are not just about learning the ins and outs of mortgages, but it's also about dealing with financial responsibility on a larger level.
Ms. TORRES: Everyone that is listening to this that perhaps is thinking about buying a home should look in the mirror and say to themselves, what is my level of commitment? What is it that I bring to the table? What am I willing to do? And it's beautiful to have all those beautiful clothes and SUVs, but an SUV would look a lot nicer parked in your own driveway than in an apartment building.
CHIDEYA: What if you look in the mirror and you just say to yourself, I'm not ready.
Ms. TORRES: I will work with you as long as it takes. We never close any files at NACA. And I've had people in the program that have come in and been qualified in a month, and I have had people that have come to the program and it's taken two to three years. Two examples.
I had a young man, straight out of jail. And he came in, he said what do I have to do. I told him get a job and we'll work together. Two years later, he had his house.
CHIDEYA: Leford, what do you - you know, you mentioned that people in your life have been supportive. Do you think any of your friends who are your age, plus or minus a couple of years, are now more interested in buying a home because of the step you've taken?
Mr. HACKETT: I would say yes. Several of my friends already owned property, but I did have a few that didn't. So I think it's sort of like a reality check. Like, hey, well, we can do it. And so I think that it's definitely been intriguing to some of my friends and inspirational, so hopefully they'll go ahead and make that decision and say, hey, now let's pick up. Because waiting around is not going to help anything. At least you can initiate, you know, and take a step towards it.
CHIDEYA: Rose, do you think that you've inspired some other people in your life to go ahead and make a purchase?
Ms. ALEXANDER: Oh, absolutely. My closest friends, I'm working with them to get their mindset to where they want to go ahead and purchase a property, and tell them that they can purchase a property in this market, including my tenant.
CHIDEYA: Wow. So you're willing to lose a good customer in order to create a homeowner?
Ms. ALEXANDER: Oh, absolutely. Absolutely.
CHIDEYA: And I want to finally ask all three of you - and I guess, Rose, let me just go to you first. The reality is that for African-American and Latino homebuyers in particular, there are a lot of challenges. You know, challenges of maybe not getting the same inherited wealth as white Americans, not having the same access to credit. How important is it to really create a space for home buying in the black and Latino communities do you think?
Ms. ALEXANDER: It's very important. We need to build our own wealth within our community. And for instance, for me, I'm inspiring other African-American and Latino future homebuyers. We may not have had the wealth, but we can start now for our future generations and give them the wealth that we didn't have.
CHIDEYA: Leford, what do you think about that idea, like we can start now?
Mr. HACKETT: I believe it's imperative to start that culture of home buying within the Latino and black communities primarily due to the fact, you know, through our history, you know, we've had struggles and stuff but you can't really harp and allow that to be a hindrance. I'm a firm believer in that. So I think that, hey, if we have to start now, start now.
I'm not saying forget history, forget the past; use that, allow it to, you know, catapult you to that next level. But you have to do it. You know, it's not really a decision of can it be done when it - it has to be done. So just go ahead and take whatever steps you have to take. Clean your credit up, utilize programs if you need be, and start now and don't look back and let those things be a hindrance.
CHIDEYA: And, Marguerita, do you think that - you know, tomorrow we're going to be covering the topic of gentrification and whether or not black and Latino home buyers tend to lose out as neighborhoods increase in price, in the home price. And so how do you think maybe renters in traditionally black and Latino neighborhoods should look at their, you know, their ability to buy homes in those neighborhoods?
Ms. TORRES: That's my target audience. Those are the guys that I want coming to my office. Those are the people that need this opportunity. These are the folks that - that's my - I can't say enough about that simply because you live there, you buy there, you accumulate wealth there.
Unfortunately, a lot of our folks are thinking of, you know, moving out of those as they get gentrified and moving out. And there are people with bags of money running through these neighborhoods, talking about, sell me your little house. And unfortunately, a lot of us do. And then when we look at - I mean, there's a reason why they changed the name from South Central to South L.A. And what I'm saying t the folks that live in those neighborhoods, come in to NACA. Let me qualify you, so that you can go back into those neighborhoods and buy those homes that they're picking up for pennies on the dollar.
Neighborhood stabilization is what the program is about. And we can't discriminate against folks that have more money and that want to buy elsewhere, but the bottom line is that the program was set up for those folks, for the little guy.
CHIDEYA: Marguerita Torres, Rose Alexander, Leford Hackett, thanks so much.
Mr. HACKETT: Thank you.
Ms. TORRES: Thank you.
Ms. ALEXANDER: Thank you.
(Soundbite of music)
CHIDEYA: Next on NEWS AND NOTES, our tech guru, Mario Armstrong, tells you how to find a new home without ever leaving the comfort of your living room. Plus, HIV testing could become a routine part of medical exams.
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