For eight years, Christi Mikitiuk rented alone, then rented for three years with her boyfriend, Travis Carruthers.
They lived in Cortland and were happy enough. But it started to bother them that were essentially throwing money away on rent. And they wanted more room for Mikitiuk’s two sons to play.
So a year and a half ago, they started working with a loan officer at Ithaca Neighborhood Housing Services.
Mikitiuk and Carruthers needed to improve their credit score to get pre-qualified for a mortgage. But with some pointers about how to improve that and by working through a bank Ithaca Neighborhood Housing Services works with, they qualified.
They credit the program with getting them into a 2,000-square-foot house on the West End of Cortland. It saved them time and money, as they couldn’t have gathered $20,000 for a 20 percent down payment. But they could come up with the $2,000 the program required, plus closing costs.
Carruthers and Mikitiuk have been in the home for just a few weeks. They’re already happier. Six-year-old Brayden and 4-year-old Landyn can run in the backyard and play in the house.
But it does even more than that.
“It’s building a future,” Mikitiuk said. “For expanding our family and pretty much the next phase in our adulthood.”
Such first-time homeowner programs are particularly helpful in rural communities like Cortland County, where the median household income is just under $51,000, about $10,000 less than the state median, according to 2016 U.S. Census data.
They help a segment of the population who can’t come up with down payment costs and they also help revitalize housing stock that needs it, said assistant vice president and mortgage originator at NBT Bank Chris Hotchkiss.
MAKING THE PROCESS EASIER
Ithaca Neighborhood Housing Services serves six counties, including Cortland, and helps people like Mikitiuk and Carruthers maneuver what can be a daunting process, said Delia Yarrow, director of lending.
“We take some of that, ‘I don’t know where to start,’ out of it,” she said. “We give them, ‘Here is the process so you understand it, and here are your in particular next steps, what’s individual to you.’”
Some prospective home buyers may need some pointers about what to ask a mortgage lender. Others might not be ready to own a home, because they have too much debtload or poor credit, like Mikitiuk. Yarrow can help them develop strategies to build credit or manage debt.
Ultimately, a more educated buyer is a more successful buyer, said Yarrow, adding the program has a 2 percent default ratio., compared with a 3.5 percent delinquency rate for residential real estate loans in 2018, according to the Federal Reserve.
And it’s not the only program out there for first-time home-buyers.
FIRST-TIME HOMEOWNER PROGRAMS
Thoma Development Consultants in Cortland administers home-buyer grant programs for the city, helping applicants determine if they meet the income threshold and setting them up with resources they may need.
Program Manager Linda Armstrong said the city gets the funding from three different sources: the Community Development Block Grant, the New York State Housing Corp. and the federal Department of Housing and Urban Development’s HOME program.
It hasn’t done any since 2017, as this year the city had other housing priorities for which to seek funding.
Armstrong said she’d like to see a multi-family homeownership model employed once more. It helps first-time buyers offset their mortgages with income from the rental units and it occupies and maintains buildings that could otherwise fall into disrepair.
The Cortland Housing Assistance Council also provides resources for prospective first-time home buyers, such as homeowner education classes and assistance with grant applications for the state Affordable Home Ownership Development Program.
NOT FOR EVERYONE
Armstrong has seen a number of successes, but there are failures, too.
She can’t quantify how many first-time homeowner programs end in foreclosure or bankruptcy, but it does happen.
According to Armstrong, an ideal home buyer is someone who:
• Has little or no debt.
• Has held the same job for at least three to five years, or longer.
• Someone at least in their late 20s or early 30s.
• Has a strong support network to help face the challenges of securing a mortgage and homeownership.
• Has been able to pay rent and save money.
And, says Armstrong, the person has to be realistic.
“And understand that once they own a home, they take on not only all the joys but all the responsibilities of keeping that home in good shape and being a good neighbor,” she said.
That’s where first-time homeowner program geared to lower-income populations can be problematic, Armstrong said. That group tends also to have more debt, she said. While a program can offset closing costs and down payments, those homeowners are still in trouble if they don’t have the money to pay taxes or make needed repairs.
A first-time homeowner program, can benefit the home owner, the neighbors — the entire community, Armstrong said.
“Sometimes there are people that are worth taking a gamble on,” said Cortland Mayor Brian Tobin. “Maybe they made a poor decision when they were younger and had some life situation.”
The programs open doors.
“By giving people the opportunity, there are success stories,” Tobin said. “People that are homeowners who otherwise would not be if they did not have this type of assistance.”
“Owner-occupants tend to have pride in ownership, they tend to be more long-term, less transient than renters,” Armstrong said. “When you’ve got skin in the game, when you’ve got an investment, you look at things differently than if you just walk into a rental to be here for a couple of months.”
Banks offer first-time home-owner programs, too. Since the housing crisis in 2008, banks are more careful about giving mortgages, she said, and they also assist with income-eligible programs.
A BANK’S PERSPECTIVE
Joseph Culver, vice president and mortgage banking manager at NBT Bank, says the bank has a housing agency program that can provide financing to first-time homebuyers. Other programs help with interest rates, down payments and closing costs.
Home in the City is the latest program the bank offers, for borrowers whose income levels are high enough to preclude them from taking advantage of other first-time homebuyer programs, Culver said. It is also not only open to first-time home-buyers, but also ones who have owned homes previously.
Typically low- to moderate-income buyers are identified as having an income that is at or less than 80 percent of the federal area median —$54,800 for a family of four in Cortland County.
The Home in the City program increases the eligibility to up to 120 percent of the area median, Culver said, or $82,200 for a family of four.
The program forgives mortgage insurance, saving about $60 a month, but the bank requires participants to take a home-owner education course, which combined with helping experienced buyers, reduces the bank’s risk, Culver said.
FINDING THE RIGHT FIT
Hotchkiss says a variety of loans are available, such as federal Department of Agriculture loans for rural areas, Federal Housing Administration loans for people who have lower credit scores or less money, and others.
“We mix and match, there are some people we can’t help, but we try to avoid that,” Hotchkiss said. Hotchkiss will make referrals if necessary.
Ultimately, the home buyer programs help everyone, Culver said. Distressed properties can be put back into good use and a family that wants a home can get one.
“It helps rebuild the tax base and it helps us from a lending perspective create a new loan product that’s more innovative and flexible and creates more homeownership and helps rebuild cities and brings people back into the area for gentrification purposes,” he said.
For budding families like Carruthers and Mikitiuk’s, it gives them a start.
At just under a quarter of an acre, with four bedrooms and possibility for a fifth, it met every requirement they had, Carruthers said. “Christi and I are now able to bring our families together more often and more comfortably.”