Smart Moves by Ellen James Martin

TIPS FOR YOUNG BUYERS IN EXPENSIVE AREAS

For years, Marty Gruer has worked in a job promoting homeownership across America. But her daughter and son-in-law -- both 26 -- are still struggling to save for a first property of their own.

The pair, who live in a high-cost area, can't afford to purchase a starter home, despite extreme budgeting.

Gruer, a homeownership expert for NeighborWorks America, a nonprofit community development corporation based in Washington, D.C., says the financial challenges facing numerous young wannabe buyers are daunting. Many are loaded with student debt and face rising home prices. What's more, as their rents continue to rise, they have less discretionary income to stash away for a down payment.

But not all factors are working against first-timers.

Besides the continuing availability of low mortgage rates, Gruer says more young purchasers are now eligible for down payment assistance programs. One source of information about these -- along with homeowner education seminars -- is the NeighborWorks website: (neighborworks.org).

Here are a few pointers for novice purchasers:

-- Let jealousy move you to action.

Sid Davis, author of "A Survival Guide for Buying a Home," says that when it comes to financial decisions, those in their 20s and 30s are heavily influenced by their social circles. So once one friend buys a house, others in the same group are often motivated to do the same.

Besides the problem of affordability, many young would-be buyers are held back by a fear of commitment signified by the traditional 30-year mortgage, according to Davis.

"They're petrified about taking the plunge, fearing they'll get in over their heads," he says.

But as Davis tells many young clients, the beauty of a fixed-rate mortgage is that their payments will stay constant, even as their incomes likely rise.

"With the passage of years, those house payments seem to shrink, especially if your place appreciates," he says.

-- Avoid immediate gratification to achieve your larger home-buying goal.

Suppose that while you're still a renter, you're invited to a housewarming party at the home of friends. Part of you likes seeing your friends successful, but another part feels diminished by comparison.

In this situation, Davis says some renters resort to the short-term gratification of making other prestige purchases that are easier to obtain than a home. They may buy a luxury car or an apartment full of new furniture, financing their purchases with credit.

Such purchases weaken your chances of achieving your dream, Davis cautions, because you may not be able to obtain as large a mortgage as you'll want or need.

The problem is that lenders look at your overall debt load when judging your worthiness for a mortgage.

"Big balances that appear on your credit reports can hobble your chances for a home. Yet in most cases, a house is a much better investment than a car or furniture," says Davis, a real estate broker since 1984.

-- Start your home-buying campaign by visiting a mortgage lender.

Are you a potential homebuyer whose credit reports were tarnished by poor decisions in your youth? Regrettably, youthful financial indiscretions have a way of lingering on your record long after your circumstances and habits change.

While there's no quick fix for a poor credit score, Davis says your standing can be restored over a period of weeks or months through methodical effort.

"Most people just have to keep plugging away until they reach their objective of a higher credit score," he says.

Davis says your best ally in reestablishing good credit is a mortgage lender or broker willing to provide sound advice.

"Even now -- with more protection for borrowers -- it's helpful to get guidance from a professional who can tell you the letters to write, the phone calls to make, and the emails to send," he says.

-- Never lock in a personal relationship just to buy a home.

These days most couples want both their incomes counted on a mortgage application to qualify for a larger loan. But Davis has witnessed the calamitous consequences that can occur when those eager to qualify for a home move in together or marry just to speed the buying process.

"Make sure your relationship is doubly strong before you go for joint ownership. Otherwise, the implications of a breakup can be exceedingly messy," he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)