While homeownership may be the norm in many communities, for many African Americans, it seems like a distant dream. African Americans households are still far less likely than white households to own their home and for many who do, they are the family’s first generation to realize the benefits of homeownership.
According to United States Census Bureau, 42.2% of black householders owned their home in the first quarter of 2018 while 74.4% of Non-Hispanic Whites did during the same period. Although there are hurdles to overcome, purchasing a home is possible, but we need the right information, access to affordable loans, and a knowledgeable lender to guide us through the process.
Saving for a down payment is often one of the largest hurdles in homeownership and since persistent income disparities between minorities and whites remain, the time it takes minorities to save the down payment could be years if not decades longer than white households. In addition, many African American potential homeowners believe they need 20% of the purchase price for the down payment, which is not true. Although there are benefits to putting 20% down, including potentially lower interest rates and avoiding private mortgage insurance (PMI), there are a number of government programs with down payments as low as 3%. Many of these programs have flexible qualifying guidelines with credit score guidelines as low as 620, various options in mortgage insurance, and options with debt-to-income ratio as high as 50%. In addition, there are a number of grant opportunities that assist with down payment and closing costs if you are a first-time buyer or have not owned a home in the last three years.
Below are a few of the grant and loan programs that help people realize the dream of homeownership. Each program has its own guidelines for participation and the grant programs often have limited funds to gift.
• DC Open Doors-Offers qualified buyers home purchase loans and down payment assistance.
• Virginia Housing Development Authority, VHDA- Helps Virginians purchase homes with a number of loan programs tailored for first-time homebuyers and homeowners who want to buy in Areas of Economic Opportunity.
• Fannie Mae Home Ready 3% Down payment-Designed for creditworthy low- to moderate- income borrowers, expands eligibility for financing homes in low-income communities.
• Freddie Mac Home Possible 3% Down payment-Offers low down payments for low-to moderate-income homebuyers or buyers in high-cost or underserved communities.
• Maryland Mortgage Program, MMP -Provides homebuyer assistance programs by offering mortgage loans, down payment, and closing cost assistance, among other benefits, to eligible homebuyers with low and moderate income.
• Home Purchase Assistance Program, HPAP – Provides interest- free loans and closing cost assistance to qualified applicants to purchase single-family houses, condominiums, or cooperative units.
• Maryland Mortgage Program, MMP 4% and 6% Grants -Provides homebuyer assistance programs by offering mortgage loans, down payment, and closing cost assistance, among other benefits, to eligible homebuyers with low-and- moderate income.
I am proud to represent George Mason Mortgage as it continues to provide education and a wide range of loan products that help minorities realize the dream of homeownership, affecting the legacy we leave our next generation.