Homeownership Can Be A Path to Multi-Generational Wealth
For more than 100 years, there has been a continuous gap between the homeownership rates of white and black people. African Americans are less likely to own, and much of that is driven by pervasive gaps in other economic measures, like education and income. Although house prices and interest rates have declined, purchasing a home is out of reach for many minority families because they have insufficient cash for down payment and closing costs, cannot pay down debts, have low credit scores, and are subject to higher borrowing costs. Yet with all the barriers we face as African American home-buyers, homeownership is still a major vehicle for building wealth and economic opportunity. Here are some tips to help you obtain the long-standing American Dream of homeownership.
Don’t get into competition with the Joneses on your home purchase
Purchase your home based on your own financial resources and capabilities, not someone else’s. General industry guidance in the past has been that a borrower can afford a house price 2.5 times his/her salary. Some buyers are not comfortable with that rule of thumb, so know your number! Before you meet with a lender for a pre-approval, you should already have a number or range in mind of what you can comfortably afford to spend. Remember to budget for the items you don’t have as a renter such as real estate taxes and insurance, home repairs/maintenance, higher utility costs, homeowner’s association (HOA) fees if applicable, commuting and new furnishing. Create a new home budget today!
Pay close attention to your credit report
Poor credit is easily the most common reason why one might be denied a mortgage. Small mistakes such as forgetting to pay your credit cards on time, maxing out your credit cards, applying for new credit too often, or cosigning for others can blemish your report and possibly impact your credit report for seven years or longer. Get a thorough audit of your credit file to ensure everything is reporting correctly and work with Coach JP on strategies to help you rebuild your credit score.
Form your squad
There are many players in the game of home-buying, and you should choose your team wisely. Your squad may consist of loan officer, realtor, home inspector, appraiser, insurance agent, title insurer, closing agency, and of course, it’s always nice to have Coach JP on your squad. Plan to implement and meet with your team four to six months ahead of when you are planning to buy to ensure you can make a competitive offer quickly when you find your dream home.
Stop doing “The Most”
If you plan to purchase a home soon (12 months or less), then you should think twice before making any substantial changes or large purchases. Mortgage lenders value a stable work history and changing jobs before or during the loan process can raise red flags. Hold off on major purchases and new lines of credit, as they too can cause hurdles when qualifying for a home loan.
To learn more about becoming a homeowner, schedule your 1:1 counseling session with Coach JP today so that you can begin to path to generational wealth.