Orlando Home Buyers Club

A recent survey found that 85% of adults agree that buying a home is still the American Dream.

Paying for it, however, has become a nightmare.

There are a lot of reasons for that, but the three primary ones include:

• Home prices: Up an astonishing 38% since 2020. The Federal Reserve says the average home sold in 2023 for $514,000. That is $138,500 more than in 2020.
• Mortgage rates: A bargain when they were 2.96% in 2021, but a burden when they soared to 7.6% in the fall of 2023.
• Down payments: Do you have $34,000 sitting around doing nothing? That was the average down payment in 2023.

That is why 82% of Americans think now is not a good time to buy a home.

It’s also why InCharge Debt Solutions started a Home Buyers Club program in the company’s headquarters in Orlando. There are assistance programs that make it possible to purchase a home, even when prices, mortgage rates and down payment obstacles make the task look daunting.

InCharge’s Home Buyers Club will educate people on the ways to overcome the challenging factors involved in buying and maintaining a home.

“We want to assist clients in addressing and resolving credit issues related to home buying,” Charlene Rose, Director of Housing for InCharge Debt Solutions said. “We’ll offer access to resources, workshops, seminars and one-on-one sessions that cover all aspects of home ownership.”

One of the primary goals for the Club is introducing first-time homebuyers to the financial assistance programs available from federal, state, county, and city agencies. Banks and credit unions also have programs to assist first-time buyers.

In other words, the American Dream is still alive, you just have to know where to go to find it.

What Is the Home Buyers Club?

The Home Buyers Club is part of an expanding line of services offered by InCharge Debt Solutions, a nonprofit credit counseling agency located in Orlando.

The Club holds monthly meetings at schools, churches, and social halls in Central Florida to help open the door to the many advantages that owning a home carry, including tax breaks, and creating generational wealth.

The goal is to clear the path to home ownership for people in Orange, Seminole, Osceola, and Lake counties.

Rose started the Home Buyers Club in 1998 while working with the Central Florida Urban League. She encountered many people who were so discouraged by the hurdles in front of them that they walked away from the opportunity to own a home.

Rose created a program that addressed people’s needs in each of the three stages of buying a home:

• Ready to buy
• Nearly ready to buy
• Not ready to buy for a long time

“People come in at different levels of readiness so it’s not fair to treat them all the same,” Rose said. “Someone who has a good paying job, a good credit score and just needs some help with a down payment is a lot different from someone with a low-paying job and no credit score.”

Things were going so well that Freddie Mac, which was chartered by Congress to support the U.S. housing finance system, did a 30-minute video on the Home Buyers Club, and sent it to gatherings all over the United States.

Rose estimates that 20-25 people a month become mortgage ready after completing the course work.

“A lot of the people we see at these meetings had basically given up on buying a home,” Rose said. “But they found out if you stay with the program from start-to-finish, there is a path to homeownership.”

What Services Does Home Buyers Club Provide

There are a variety of ways and means to solve financial problems, which is a good thing because there are a variety of ways and means that people get into financial trouble.

That is to say that everyone’s financial situation is unique. What works successfully for one homebuyer may not work at all for another.

Some people struggle with having enough income to afford a monthly mortgage payment; some have the income, but their credit score needs massaging to get approved for a loan; some have a good income and credit score but can’t get enough money to make a down payment; and nearly everyone struggles to put enough money in an emergency fund to take care of unexpected expenses once they get in a home.

Here is a look at those four problem areas and what the Home Buyers Club can do to help solve them:

How Much Income Is Needed to Buy a Home?

The amount of income needed to buy a home depends on the sale price of a home and the sale price depends on the location. It’s no secret that it costs a lot more to live in certain parts of Central Florida than it does in others.

The median price (half above, half below) for a home in Orange County was $430,000 in 2023. The county immediately south, Osceola, had a median price of $390,000. Seminole County, which is immediately north of Orange, had a median price of $409,000. Lake County, due west of Orlando, had a median price of $374,000.

Experts say that your annual income should be about 36.6% of the home’s sale price. Based on that number, here is a chart showing how much income you would need to afford a home in your preferred location. The chart is based on the home location, 20% down payment and a mortgage loan of 7%.

Those numbers, especially in the annual income needed bracket would be frightening for most first-time homebuyers. But that is where the counselors at the Home Buyers Club come in with perspective and practical assistance.

The perspective is that half the homes sold in each of those counties was less than the number listed above, sometimes considerably less. That means the down payment, monthly mortgage payment and annual income needed also would be considerably less.

As for practical assistance, Home Buyers Club counselors know where to get help for the down payment. They offer a HUD-certified program that will help you understand the importance of a credit score in reducing the interest rate on a home loan.

Credit Score

The No. 1 problem first-time homebuyers have to overcome is being approved for a loan and the No. 1 reason for not being approved is their credit score.

Many people don’t know what a credit score is – it’s a number that indicates how likely you are to repay a loan – or how that score is calculated. They don’t understand that lenders use credit scores to determine the amount of risk they’ll take before lending someone $300,000 or more for a home.

“A lot of the people we see don’t even have a credit score,” Rose said. “They just pay cash for everything and don’t even have a bank account.

“And some people that have a bank account, overdraw that account many times or just pay the minimum every month on credit cards and don’t realize the damage that does to their credit score.”

Credit scores range from 300 to 850. The higher your score, the better your credit. The average credit score in the U.S. is 718. FICO, the company that produces the credit scores used by 90% of lenders, says that any score above 670 is considered “good” and above 750 is excellent. A score below 670 is considered “fair” and one that drops below 580 is “poor.”

About 33% of consumers fall in the “fair” or “poor” category.

Credit scores are the major qualifying factor in buying a home. In today’s market, if you fall into “fair” or “poor” category, you’ll struggle to be approved for a loan. If you do get one, it will come with a very high interest rate.

Credit scores can improve, but they need some massaging and that’s where the Home Buyers Club excels. The Club’s certified counselors specialize in nursing credit scores back to good health. They will educate homebuyers on the steps needed to push that score over the 700 mark and not only be approved for a loan but receive an affordable interest rate on the mortgage.

“Many of the people we see are lucky if they have a credit score in the 500s,” Rose said. “They might have to spend 12 months in the program to turn that around, but it can be done. We just have to educate them on how to do it.”

Down Payment Assistance

Conventional wisdom says you should put 20% down on a home but conventional wisdom obviously hasn’t gone shopping in today’s housing market.

As the chart above demonstrates, a 20% down payment in Central Florida is a lot of money. Not many first-time buyers have the $80,000-plus that would cover 20% of the price. In fact, one out of three homebuyers put down less than 10%.

BUT GOOD NEWS!

Lenders offer various types of loans that don’t require 20% down. However, you likely would have to pay private mortgage insurance, a cost that would be added to your monthly payment. This protects the lender in case the borrower defaults on the mortgage.

More importantly, there are grants available from government agencies, banks, credit unions and some nonprofit agencies that help first-time buyers make a sizeable down payment. The amount of down payment assistance is based on household income and size. The money can be used for a down payment or to cover closing costs and you might be shocked at how much is available.

For example, the Orange County Down Payment Assistance program provides $45,000 for eligible very low-income buyers; $35,000 for low-income buyers and $20,000 for eligible moderate-income buyers.

Seminole County offers $50,000 for very low-income buyers; $30,000 for low-income buyers; and $10,000 for moderate-income buyers.

Lake County’s program provides $50,000 for extremely low income; $40,000 for low income and $30,000 for moderate income.

Osceola County offers the most assistance but has so many applications it runs out of money. In 2024, for example, the program didn’t accept applications until April.

In Osceola, extremely low-income and very low-income buyers could receive $80,000; low-income buyers could receive $60,000 and moderate-income buyers get up to $40,000.

Each of those programs requires applicants to complete a Homebuyer Education Course from a Housing and Urban Development (HUD) certified counseling agency, and its counselors are HUD certified counselor and experts at finding the right program for first-time homebuyers.

Emergency Fund

The joy of homeownership wears off quickly if you don’t have an emergency fund packed and ready when you move in.

Leaky plumbing, broken air conditioning systems and appliances that quit working are problems every homeowner eventually faces. And if you’re really naïve about expenses, there is also the matter of property taxes and possibly homeowner association fees that need funding once you’ve set up house.

Somehow, Americans stubbornly refuse to plan for these expenses. More than half of U.S. adults say they don’t the cash to pay for a $1,000 emergency. One-third say they have more credit card debt than emergency fund savings.

Unfortunately, there is no program from government, banks, or nonprofit agencies to take care of the problem. Emergency funds are a DIY (Do It Yourself) operation that every homeowner should set up.

Experts say you need 3-6 months of income set aside for an emergency fund that might go in many directions, including home repairs and maintenance; medical bills; or every day expenses should you lose your job.

The emergency fund for home maintenance or repairs should be equal to 1% of your home’s value. So, if you own a $250,000 house, figure that you’ll need $2,500 a year to handle unexpected annoyances like your refrigerator going hot or a tree crashing through a portion of the roof.

So, where do you get the money for an emergency fund? That’s the DIY part.

The starting point is to create a monthly budget with a line that requires you to put a certain amount of money into an emergency fund. The easiest way is to ask your employer to send a set percentage of your paycheck into a separate account that is designated as an emergency fund.

Other ways to contribute to an emergency fund include:

• Get a second job and deposit the paycheck in the emergency fund account.
• Send an income tax return directly to that account.
• Reduce spending habits, especially things like buying coffee and eating out.
• Comparison shop annual bills like car and life insurance.
• Put your credit cards away and only use them in emergency situations.

The savings from all that will surprise you. So will the cost of home maintenance and repairs. Be ready for both.