no more than 36% of your monthly income.
Ed Dudley Jr., found out the hard way just what the debt-ratio game could do to home-buying dreams. With his sights set on a three-bedroom home in Dayton, Ohio, Dudley found his ratio wrecked due to his car loan and high credit card balances. Even after paying off his car note, Dudley discovered that banks still shied away since his expenses totaled more than 36% of his monthly income. It took several weeks and some creative math on the part of his accountant, coupled with a strong recommendation from his mortgage broker, before the bank would approve his loan. “A first-time home buyer doesn’t realize that it’s all about the numbers,” warns Dudley.
STARTING THE HUNT
The first thing to decide is just what kind of house you want. Whether a two-family brick home or a condominium, each dwelling presents different financing options to lenders.
Next, find a real-estate agent. Asking friends and family for references is a good start, although hiring your own broker for a flat fee or hourly rate will probably result in a better deal. Most agents listed for a particular property are out to make a sale and protect the sellers of the individual property. So setting up the right relationship with a broker will go a long way in saving you time and money.
However, you can choose an agent who represents a firm you want to work with. Tell him or her what kind of home you’re looking for and the kind of neighborhood you’d like to consider. That firm’s broker can then consult the multiple listings service, a computer database of homes registered for sale with all agencies, for properties fitting that description in those areas. He or she will inform you about houses and set up appointments for you to see them. When you buy a home, your agent will get half of the commission on that sale and the listed agency will get the other half.
Still, there remains one particularly prickly issue for African Americans: getting a bank and insurance company to actually approve the neighborhood you wish to live in. Troy White, 31, single and a Howard University graduate, found out just how thorny when he found a two- family brownstone in the Hamilton Heights section of Harlem in New York City. White’s choice didn’t sit well with potential lenders or insurers. Although the Fair Housing Act makes it a crime to discriminate against mortgage applicants seeking to buy homes in mostly minority areas, the first bank he approached refused him. White felt the decision hinged on his choice of Harlem. He unearthed a black loan officer at the same bank, who helped her colleagues see the value of the property despite its “undesirable location.”
Even after he got the bank on board, White faced a second hurdle: trying to get insurance for his pending new home. He found it nearly impossible to get full-coverage homeowner’s insurance, finding that appraisers severely undervalued the property and wanted