First-time home deal guidance

Advice: Nonprofit groups offer free counseling to those facing the task of buying a house.

July 16, 2000|By Brian Simpson | Brian Simpson,SPECIAL TO THE SUN

When Dora Loeven wanted to buy a house in 1986, she turned to a new nonprofit organization called Tri-Churches Housing Inc. The nonprofit was so small it had to borrow an expert from another homeownership counseling organization to help guide Loeven through the financial intricacies of home buying.

The 10 1/2 -foot-wide rowhouse she bought doesn't offer the alpine vistas that she'd prefer, but it does deliver a great view of Pigtown.

"It gives me my freedom, independence and a little bit of property," said Loeven, 74, a native of Holland who moved to the United States in the late 1960s. "I have flowers here in my little front yard at the moment - tulips - and people often look at them and they say, `Isn't that nice.'"

Since Loeven moved into her Pigtown rowhouse 14 years ago, the Tri-Churches staff has grown to five, and the nonprofit organization now advises 500 people per year. Free homeownership counseling in Baltimore has enjoyed similar growth. Now, housing counseling is provided in the city by 25 organizations, 10 of which have started in the past decade. But along with that growth have come problems.

The groups, generally funded by a mix of federal, state and local grants as well as support from banks and other mortgage lenders, educate first-time buyers about the home-buying process. Buyers, some of whom have never had a checking account, learn everything from how to choose a loan, to what to look for in a house, to how to prepare for the responsibilities of homeownership.

In the ideal situation, counselors talk with prospective buyers before the customers even begin looking at homes. At larger organizations, participants might first attend a home-buying overview seminar and then take classes on how to look for a home, the loan process, and what happens at settlement.

This education can be followed by individual counseling for prospective buyers on such subjects as improving bad credit, determining the amount of the monthly mortgage they can afford and setting aside money for home repairs. Bolstered with this knowledge, they then can seek a home.

While most first-time buyers gain free, valuable information from the counselors, some local housing experts question whether the current state of homeownership counseling reflects more quantity than quality. The 25 groups offering homeownership counseling have different qualifications for their counselors, resulting in a wide disparity in experience and abilities from one organization to the next.

The organizations also must meet such challenges as being impartial advisers to buyers while receiving financial support from lenders, and dealing with last-minute demands from buyers desperate to meet a loan's counseling requirement.

Vincent Quayle, executive director of the St. Ambrose Housing Aid Center, is a fierce critic of how most programs work.

"There's not real homeownership counseling [in Baltimore], or very little. Most of what we have is a sham," said Quayle, who in 1968 helped found St. Ambrose, the city's first homeownership counseling organization.

He points out that 5,000 petitions for foreclosure were filed in the city last year. "That's how bad things are right now in Baltimore," Quayle said. He blames his organization and others for not catching on sooner to the fraudulent real estate schemes that have troubled the city in recent years.

New and inexperienced counselors are partly to blame, he said. "Everyone is running around calling themselves counselors," Quayle said. "How do you tell the good ones from the bad ones or the incompetent ones? It's not easy."

While the process may be imperfect, it can save buyers from bad real estate deals that can become financial quagmires.

Will Backstrom, a homeownership counselor for Neighborhood Housing Services in Patterson Park, offers a cautionary tale.

Backstrom remembers advising two women on different occasions that each should wait to buy a house. Each needed a year to establish a record of stable income, clean up credit problems and save money. Neither wanted to wait.

He learned later that both women signed contracts with a "flipper," a real estate investor who buys deteriorating houses, makes cosmetic repairs, and sells the houses for inflated prices, often slipping in a second mortgage unknown to buyers.

Months later, Backstrom happened to see the women after they realized they had been taken. "They both came up to me and said, `I should have listened to what you said.'"

Counseling comes first

Other buyers turn the education process on its head by reaching out for counseling after signing a contract on the house they want.

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