College students preparing to purchase their first home will encounter a complex process, with many pitfalls along the way.
In order to provide a better understanding of both the housing market and the potential perils, Christina Barth, a Washburn University senior with experience in the real estate market, will be teaching two classes at the Oakland Community Center. The classes will cover such areas as the basics of buying and selling a house, what you need to know about renting property, the steps involved in qualifying for a home loan and how to fix a poor credit rating.
According to Bob Brackney, a Topeka brokering agent, the biggest pitfall young people encounter when trying to purchase their first home is getting overextended on credit, with high car payments and credit car bills.
“College students in the housing market should first understand the “three c’s” of financing a home: credit, collateral, and capacity,” said Brackney.
Loan officers will first look at a prospective buyer’s credit history to determine if their bills were paid on time, or if they have any outstanding debts. Next is collateral, which in most cases is the home itself. Factors here will include the condition of the home and the appraised value. Capacity measures the type of reserves the buyer has. Most loan officers will require that the equivalent of two months of payments be set aside before approving a loan.
Brackney also advises that rather than putting a significant amount of money down on the home it would be wiser to look for other investment avenues.
“If they invest their money in stock or elsewhere, it will grow in the future, and they will be ahead of the game in 10 to 15 years,” said Brackney.
The flip side of that, however, is that a larger down payment will decrease the monthly payments.
Another important aspect for prospective buyers is location. The most common questions real estate agents get asked pertain to location, and whether the home is close to good schools, shopping and places of recreation such as parks.
“When marketing in real estate, it’s an industry of percentages. Real estate agents look for the best locations that will appeal to the greatest number of people,” said Brackney.
Barth’s classes will also outline basic tax principals used by home loan officers.
“The basic tax formulas used for car loans are also used for home loans,” said Barth.
A person with a poor credit history should not be discouraged from attending the classes, it will teach them important steps to take in fixing their credit problems.
Entitled “First time home buyers” and “Renting investment property,” Barths’ classes, offered through Parks and Recreation of Topeka, will be held in two one-hour sessions beginning at 10 a.m. Saturday, Feb. 11.