Homeownership

African-Americans Passionate About Homeownership Despite Barriers

More than any other demographic group, African-Americans perceive homeownership as an integral component of the American Dream, and a way to build security and wealth for their families, according to a recent survey.

The Wells Fargo How America Views Homeownership poll, conducted by Ipsos Public Affairs, found that 90 percent of African-Americans said homeownership would be a dream come true and more than half were considering buying a home within the next two years.

Like many Americans, African-Americans want to own homes, but are often challenged by barriers that are factual and perceived. Lack of inventory and affordability remain key reasons for keeping aspiring homeowners on the fence. And even though we have seen improvements in the economy, underemployment and unemployment are factors in the inability to own a home.

Misconceptions about homeownership and lack of knowledge about the process lead to perceived barriers to owning a home. For example, in the Wells Fargo survey, nearly half of African-Americans that responded believed a 20 percent down payment is necessary to buy a home. However, many home loans do not require a 20 percent downpayment. Some are as low as 3 percent.

Required employment for mortgage approval is another misconception. Mortgage approval is not contingent on full-time employment. Homebuyers need only be able to demonstrate their ability to repay their mortgage loan. However, 54 percent of African-Americans believed homebuyers must have full-time jobs in order to qualify for a mortgage. In some loan programs, income from others who will live in the home, such as family members or renters, can also be considered.

The survey also highlighted the possibility that some credit education could help aspiring African-American homebuyers. Eighteen percent weren’t sure what constitutes a good credit score, 35 percent didn’t know what minimum score they would need to qualify for a mortgage, and 20 percent didn’t know their own credit score range. While lenders do consider credit scores in making mortgage decisions, credit scores are only one factor, and minimum credit scores vary based on the type of mortgage and loan amount. Homebuyer education and credit counseling could provide key information about the elements of a good credit score or how to develop a good credit profile.

According to the National Association of Realtors only 5 percent of homeowners are African-American. Wells Fargo believes that’s too low and we are committed to positively impacting the declining homeownership rate among African Americans in this country.

In February of this year, Wells Fargo announced an African American homeownership commitment that includes a projected $60 billion in lending to qualified African-American consumers to create at least 250,000 homeowners by 2027. We also will stay focused on increasing the diversity of our sales team by hiring more African-American home mortgage consultants, and we will dedicate $15 million to support a variety of initiatives that promote financial education and counseling.

We can’t do this important work alone. We are proud to be joined by the National Association of Real Estate Brokers, the NAACP and the National Urban League in our efforts to advance homeownership within the African American community.

For those who are interested in becoming a homeowner, here are some tips to help you get prepared for the process of getting mortgage approval:

* Monitor your credit — Your credit report and score can affect your ability to qualify for a mortgage, how much you can borrow, and the interest rate and terms you’ll be offered. Review your credit report and score at least once a year. You can get an annual free credit report from all three national credit bureaus at www.annualcreditreport.com.

* Control other debt — Debt-to-income (DTI) ratio compares your total monthly debt to your monthly income and is an important factor lenders consider in mortgage applications. A good tip is to keep your DTI below 36 percent by paying down debt that can include credit cards, auto loans and student debt.

* Save for a downpayment — Even though you don’t always need 20 percent down in order to qualify for a mortgage, most loans require some type of downpayment. Some financing programs allow qualified homebuyers to secure a mortgage with as little as 3 percent. Or, you may qualify for programs that benefit veterans if you’ve served in the military.

* Be able to prove income — All borrowers must be able to demonstrate their ability to repay their mortgage loan as part of the approval process. Although you don’t need a high income to qualify for a mortgage, you will need to be able to document your income with W2s, tax returns and other paperwork.

* Build up an emergency fund — Unexpected expenses are a reality of homeownership. An emergency fund can help you cover costs such as repairing a leaky roof or replacing a broken-down appliance. Lenders are also likely to view you as more financially responsible if you have six months’ worth of expenses saved up.

To learn more about homebuying and to find a mortgage professional near you, visit www.wellsfargo.com.

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