According to a 2020 Freddie Mac report, there are nearly 3 million “Mortgage Ready” African American renters who could qualify to own a home today. As we embark on our journey to help Blacks build sustainable wealth through homeownership by lending $1 billion dollars to first-time homebuyers by 2023, we can’t stop thinking about those 3 million individuals.
What are they doing now? Do they believe their dream of homeownership is unattainable? Are they working tirelessly to save a 20% down payment? Are they questioning how much do they need to save to buy a home?
These 3 million potential homebuyers are likely better positioned to purchase a home than they think. Unfortunately, however, there is a lot of misinformation circulating about the homebuying process which makes it even more difficult for individuals who have never bought a home (especially within the Black community) to know fact vs. fiction.
Here are the most common myths that prevent consumers from taking the first step to purchase a home:
Myth: You must pay a down payment of 20% of the purchase price.
Truth: While putting 20% down on a home helps lower your loan to value (LTV) ratio (how much of the home’s value is being financed by the lender), saving 20% isn’t possible for every borrower. Thankfully, there are loan programs that exist to make homeownership more accessible. Conventional loans, for instance, allow first-time homebuyers to put down 3% of the home purchase price; while, government-backed FHA loans, allow borrowers to pay a down payment of 3.5%. Reach out to a loan officer or mortgage broker to discuss which loan program makes the most sense for you and your family.
Myth: Borrowers must have a 700 FICO store
Truth: The minimum credit score needed for most loan documents is 620. However, there are other loan programs that accept lower scores (as low as 500) with a larger down payment.
Myth: Must have no debt
Truth: Your loan officer or mortgage broker will approve you based on your debt to income ratio and what you can actually afford to purchase. Speak to a loan officer to get pre-approved and see how much home you can afford.
Myth: It’s cheaper to rent than to buy.
Truth: This is dependent upon the market and where you live. In some cities, the cost of owning a home can be less or equal to monthly mortgage payments. Yes, owning a home means paying for home maintenance costs out of pocket, but when factoring in the value and quality of life that owning a home may afford compared to renting an apartment or condo (more square footage, higher bedroom count, having a yard, etc.,) those expenses may be worthwhile. Check out our rent vs. buy calculator tool to determine the best option for you.
