Adriya Perry and her husband Phil might have bought their home in Ypsilanti Township right after their wedding if they'd known it was possible. But it wasn't until well into their second year of marriage that they began to realize they could buy a house even without a perfect credit score and a huge savings account.
"At first, we were definitely thinking about how hard it would be to buy a house and how much money you'd have to save," Adriya Perry says.
A real estate agent introduced the couple to an MSU Extension - Washtenaw first-time homebuyer class. There, they learned the basics of budgeting for home ownership and received information about a number of programs that can assist with low-interest or forgivable loans and down-payment subsidies.
"It was definitely an eye-opener," Perry says. "It made us (realize) it was possible to buy a house, and there were all these options we didn't know were out there."
Housing affordability has been a long-term problem in Washtenaw County, but until recent years, the housing market in Ypsi and Ypsi Township was less daunting. Rising home prices and rents in the Ypsi area are contributing to gentrification as long-time residents are priced out of the market. But a variety of little-known resources also exist to help those residents establish or maintain a long-term stake in the Ypsi community.
"The biggest issue is lack of education about programs that allow you to get into home ownership," says Candye Hinton, owner and principal broker of Hinton Real Estate, based in downtown Ypsi. "They've been told they need 20% down and a six-month reserve of mortgage payments. What I tell clients is, 'You could buy a house. Let's just look at your resources.'"
Both Hinton and local mortgage broker Clyde Montgomery emphasize that home ownership isn't just about the first-generation occupants, but that it also can create a path for building intergenerational wealth and helping your children to have a better life than you did.
"I'm in business to make money like everybody else, but I believe in homeownership," Montgomery says. "(The Book of Proverbs says) a righteous man leaves his kids' kids an inheritance, and as a broker, my inheritance is me leaving you a house."
Down payment assistance and low-interest loan programs
One big hurdle for the prospective homeowner is coming up with a down payment, but there are local programs that can help.
For instance, FlagStar Bank offers a variety of down payment and low-interest programs in an effort to be more socially responsible in the communities where the bank has branches. These programs help prevent redlining, the practice of refusing home loans to people who live in an area that banks consider a financial risk.
Perry and her family took advantage of a "Destination Home" program through FlagStar, which required zero down payment and included flexible qualification criteria.
The Michigan State Housing Development Authority also offers programs that provide down payment assistance, including an ongoing program to offer low-interest loans of $7,500. MSHDA also occasionally offers $15,000 forgivable loans through its "Step Forward Down Payment Assistance" program to be used by first-time home buyers in conjunction with a MSHDA home loan toward the purchase of a home that costs no more than $224,500.
The loan is forgiven by 20% each year the buyer lives in the home, and if the borrower still occupies the home as their primary residence after five years, the loan is completely forgiven. The money can be used not only toward the down payment but for closing costs, escrow, and even reducing the principal on the new mortgage.
The latest round of these forgivable loans was offered in October 2018 on a first-come, first-served basis in 61 eligible ZIP codes in 10 Michigan counties, including 48198, until the $20 million allotment was used up.
Another strategy many prospective homeowners aren't aware of is that housing choice vouchers (formerly called Section 8 vouchers) available to low-income residents in public housing programs can also be used toward a down payment and closing costs on a home.
"Just because someone qualifies for a Section 8 voucher doesn't mean they don't have good credit, just that they lack funds," Hinton says.
Mirada Jenkins, the housing infrastructure manager for Washtenaw County's Office of Community and Economic Development, cautions that the potential home buyer still has to "meet qualifying factors in order to access that opportunity." The resident would need to contact the local public housing authority to convert the voucher, educate themselves on the local housing market, and secure a mortgage.
Kayia Hinton of Hinton Real Estate says residents often only think of a nuclear family being able to own a home, but there are also nontraditional ways to partner up and qualify for a mortgage.
"You don't need a family with two kids and a dog to want to have a stake in what's happening in Ypsi," she says. "You can buddy up with a college friend and get on the mortgage together."
Building better credit
Coming up with a down payment and having the cash flow to make a monthly mortgage payment is important, but a low credit score or lack of credit history in general can also create a barrier to obtaining traditional home loans. However, there are ways around that.
For instance, some prospective homeowners might not have a bad credit score so much as very little credit history. They can often build a credit history and a solid credit score by taking advantage of credit-building programs. Credit-building loans of $2,000 or less are available through the University of Michigan Credit Union's "Build My Credit" program.
Montgomery, the owner of C&B Mortgage Solutions on Ecorse Road in Ypsi, says that while traditional loans are typically given to people with credit scores in the mid-600s or above, he has worked with people who have credit scores as low as 580 or even 550.
"There are different stipulations and the amount of down payment would have to increase with a 550 versus a 580," he says. "But there are other ways to qualify a borrower and make home buying possible for people who are credit-challenged."
Another option is to work with a credit repair program to raise the credit score. Those programs are offered through various sources, ranging from nonprofits like Habitat for Humanity of Huron Valley to local mortgage lenders.
Montgomery says he can use a "what-if simulator" and tell clients exactly what they need to do to get their credit up to a certain qualifying score, whether that's paying off debts or identifying and fixing errors on the credit report.
"It might take someone two to six months to get their score to the point that it's credit-worthy to buy a house," he says. "There's only one way to fix your credit, and that's the right way. There's no magic wand."
The role of public policy
Lawmakers and local politicians can also play a role in making housing affordable and home ownership achievable.
Montgomery says several cities in southeast Michigan including Westland, Taylor, and Livonia offer down payment assistance programs with the intention of getting people to stay in their community, and he'd like to see a similar program in Ypsi.
One program along those lines is Eastern Michigan University's (EMU) Live Ypsi program, which offers eligible EMU employees $5,000 or $10,000 forgivable loans for buying homes in the city of Ypsi or select areas in Ypsi Township. If the buyer remains an EMU employee and retains the home as their primary residence after five years, the entire loan is forgiven.
Jenkins says that in addition to the various home ownership assistance programs, policy and zoning changes could make a big improvement in housing affordability and opportunities for home ownership across the county.
"We can't control affordability because the market is private, but what we can do is provide opportunities for individuals to hear about and access programs to attain home ownership," she says. "We also need to advocate for and support zoning and policy changes around the type of housing we develop … to allow for more variety in the type of housing available."
Jenkins says homebuyer education and resources for potential buyers are both important.
"You have to marry the two together, market it, and teach it in areas where people can access it in order to make progress in that area," she says. "I'm passionate about putting folks in a position where they can believe it's possible for them."
Sarah Rigg is a freelance writer and editor in Ypsilanti Township and the project manager of On the Ground Ypsilanti. She joined Concentrate as a news writer in early 2017 and is an occasional contributor to other Issue Media Group publications. You may reach her at firstname.lastname@example.org.
All photos by Doug Coombe.