Tag: homeownership

4 Questions About Homeownership

A key focus of my blog is Financial Literacy/Money. Homeownership is a key pillar to building wealth. It can also wreck your finances if you don’t understand the pitfalls of it. The following contributed post is entitled, 4 Questions About Homeownership.

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Homeownership is for many the ultimate American Dream. Indeed, we have to remember that the Americans of today were once immigrants who had come – or been shipped – to the country in the hope of making a living. What Thomas Jefferson called the pursuit of happiness is, after all, nothing else than having a place we can call home. However, purchasing a home doesn’t come without risks. Indeed, it doesn’t matter how many of us dream of homeownership; not everyone is ready to become a responsible homeowner today. Indeed, investing in a property is a commitment that requires a change of mindset. Some might even refer to it as the first step of adulting. The truth is that you can’t buy a home if you can’t answer the following questions:

Learn frugality

Can you avoid unnecessary expenses?
Buying a home is an expensive adventure you need to budget. There is no secret; unless you’re lucky enough to have inherited a substantial income, you will need to embrace a frugal lifestyle to save ahead of your property purchase. Frugality being the art of living within your means, it’s an essential skill to develop at the beginning of your homeownership journey. Indeed, it allows you to save money without depriving yourself. More importantly, it’s the key to keeping your budget under control safely.

Can you be part of a neighborhood?
You never buy just a house or an apartment. You buy your entry into a neighborhood. It’s the ability to embrace living at the heart of a community that makes your home a safe investment. Why so? Because your property becomes part of an ensemble that shares common values and interests, such as keeping the community safe and clean, for instance. As a homeowner, you agree to participate in the local activities and to get to know your neighbors. Ultimately, active communities are a magnet to shops and other amenities. Additionally, they significantly improve your quality of life. But it only works if you are ready to become a part of it.

Be part of your community

Can you fix things?
Things break. As a tenant, you can call your landlord to get it fixed. As a homeowner, you have to roll up your sleeves and sort it out yourself. While some repair jobs should be left to the pros – such as electrical and plumbing matters – anything else could be fixed with some DIY skills. Prepping and painting a room, for instance, doesn’t require expert knowledge. Dealing with a door that sticks shouldn’t take longer than a few minutes in most cases.

Can you visualize your decor?
Ah, the dilemma of decorating your interior! Many first-time homeowners feel confused when it comes to creating their own style. Indeed, for many, living in a rented place reduced their involvement in interior decor to a minimum. Therefore, it can be tricky to visualize all the options in a room. You’d be surprised to know that many home decor projects end up becoming a waste of money because people fail to take measurements and test their design ideas first.

In conclusion, if you can answer yes to the previous four questions, you are ready to buy your first home. However, if you’re still struggling with some of these elements, it’s a good idea to delay your purchase until you are more confident with your budgeting, community engagement, DIY skills, or decor planning.

Simone Griffin of HomeFree-USA discusses homeownership and the African American community part two

This article is a continuation of my interview with Simone Griffin of HomeFree-USA regarding homeownership and the African American community.  In part one, Simone discussed the inception of her organization HomeFree-USA, and why homeownership is critical to the African American community in the United States.  In part two, we discuss some of the historic and recent impediments to black homeownership, some of the things our youth can start learning at an early age regarding Financial Literacy, and finally the effect of the Housing Market Boom/Crash on African American wealth.

Anwar Dunbar:  You touched upon this earlier when you discussed disparities in income, but what are the other main impediments holding African Americans back as a group in terms of homeownership?

Simone Griffin:  There are a couple of different things.  Number one, lenders aren’t as open to lending to people with lower credit scores.  Because they’re over-correcting after the housing crisis, they prefer to lend to people with a 750 credit score or higher.  Many black people don’t have that, but it doesn’t mean that we can’t pay our mortgages.  They simply may not have learned the importance of credit and how to manage it.  And it has nothing to do with your education status – they don’t teach personal finance in college, and are just beginning to do so in high schools.

AD:  No, they don’t.

SG:  If your family doesn’t know anything about credit and you don’t learn about it in school, then how could you be prepared with a 750 or greater score?

AD:  Yes, that’s a very good point.

SG:  A big difference between us and non-Hispanic whites is that between the Great Depression and the 1960s when America was building its wealth, black people were locked out due “Redlining” and other discriminatory tactics.  The Fair Housing and Fair Credit Laws were enacted in the late 1960s and early 1970s, which made it illegal to discriminate against people of color.  The problem was, when we tried to buy homes we were expected to make a 20% down payment, and many black people simply didn’t have that type of money. So when home appreciation soared during the 1970s and 1980s, many moderate income black people were unable to buy, which further crippled their ability to build wealth.  Many are still trying to catch up, and it’s 2017!

Meanwhile there are other ethnic groups who have money saved and may be able to give their kids a leg up.  Their kids may have student loan debt, but they can help them pay down their debt faster, or with a down payment on a house.  Mostly though, we’re starting over with every generation.  There are still many first generation college students in our communities – and college is a big indicator of how much more money you’ll make throughout your career.  So we’re still playing catch up to a degree.  This is why HomeFree-USA is so important, because you need that type of knowledge and access to get ahead.

Likewise, we’re positioned to tell the mortgage industry, ‘You say you want diversity, and want to lend to all kinds of people, but your 750 credit score requirement is locking black people out – black people who really could qualify.’  We’re not suggesting they throw a mortgage product out there and tell everyone they’re eligible. We never did that.  There were so many people we met with during the housing boom and said, ‘You should not be buying right now.’  But there were certain things they could do to improve their position, and we’re here to guide them through the corrections.

What’s important is a level of education to the borrower and to the lender.  The lender needs to understand what the borrowers are dealing with right now – what black people are dealing with.  We may have excess student loans, but if you look at non-traditional sources of credit, you will see that these borrowers are typically paying their rent on time for example, something that’s rarely reported to the credit bureau.  Cell phone and utility bills are also not always reported.

Many African Americans are unbanked or under-banked and we’re not used to working with the traditional lenders.  But that doesn’t mean that we’re not paying our bills, and these are the kinds of things that we’re communicating to the lenders.

AD:  I help teach the Dave Ramsey Financial Peace University Ministry at the Alfred Street Baptist Church.  As I’ve gone through as a student and a group leader, I think about the things that I was taught home (and not taught).  My mother says that she taught us about mortgages, but I don’t remember getting any of that – or I was just too caught up in the distractions of being a young adult.  Is there an age that’s too early for our kids to start learning this stuff?  Ideally how early should our kids be getting these things?

SG: I think you can start early, but age appropriately.  The sooner someone can start working and making their own money, that’s a big thing.  But in the interim just teach kids about giving, saving and spending, and allow them to hold their own money.  Kids for example, may know that money comes out of an ATM but they don’t understand what goes into making the money.  They may ask, ‘Can we get this?’, and you might reply, ‘No it’s not in the budget,’ allowing you to go into an understanding of what the budget is.

My friend has a nine-year old son who is in love with Pokémon cards and always asks her to buy them so he can trade them in school.  The problem is, he has no concept of how much the cards cost.  I suggested she give him an allotment of money every month for the cards, and once he spends it, it’s gone and that’s it. When it’s his money, as opposed to asking her to spend her money, it will change the level of focus he has on the purchase and care of the cards.

AD:  Earlier you talked about African Americans not having access to homeownership when other groups did from post the Depression era to the 1960s.  How did the 2008 Housing Market Crash affect African American homeownership since we were already playing catch up and were just getting into the game?

SG:  It obliterated our wealth.  One big mistake African Americans made is that we looked at our houses as investments.  We would buy a house, but not put any money into savings or other investment vehicles.  In the 1960s, 70s and 80s, our parents and grandparents had pensions, but most companies have replaced those with 401k plans, which they may not contribute to.  We now have to be conscientious about our entire financial life, including retirement.

When the housing crisis hit, it wasn’t all our fault.  Some people were truly led astray, and there were certainly many people who shouldn’t have been approved for such large mortgages.  I lived in Atlanta during the crisis, and the city was hit brutally by the crisis.  I met so many older people whose houses were paid off, and somebody at their church convinced them to get a Reverse Mortgage, which needlessly got them back into debt.  They didn’t even know what they were signing.  There were so many scams going on in Georgia at that time, including one where people thought they were signing up for one mortgage payment, only to find that there was a carbon copy of the real mortgage document underneath the original one, which required them to pay a far higher monthly payment.

Buyers were often blamed and told they bought too much house.  No, some of these people did their best to buy affordably, but were led astray – another reason why HomeFree-USA is so important.  If you’re working with us, we teach you the questions to ask your loan officer, realtor, inspector and appraiser.

During the housing boom loan officers were saying, ‘Oh, I can get you qualified for a $400,000 house even though you only make $40,000.’   Couple that with an agent who says, ‘I see you’re qualified for $400,000. Let me show you a house that’s worth $450,000 and we can negotiate down to $400, 000,’ and it ends up finally being around $425,000.  You say to yourself, ‘It’s fine because my loan officer says I can pay $500 every month.  So, today your payments may be an affordable $500 a month, which makes you feel comfortable in using your credit cards to pay for your new furniture. But five years later you receive a letter stating that you owe $20,000, due within 30 days. After the 30 days and $20,000, your new mortgage payment will be $5,000 per month. This actually happened to several people.  The homebuyers were either completely unaware of the balloon loan, or were told by their loan officer that they could simply refinance.  But the housing market crashed and they now owed more than their house was worth, meaning they were stuck.

This is why I avoid thinking of a home as an investment.  It can go down in value, especially at the beginning of your mortgage before you’ve built any equity.  We go financially awry when we make our house our only real investment without understanding that you have to diversify your portfolio.

This interview will continue in part three of Simone Griffin of HomeFree-USA discusses Homeownership and the African American Community.  To read some more of Simone’s financial writings, visit her blog at www.moneymagnet.homefreeusa.org.  She can also be contacted directly at moneymagnet@homefreeusa.org.

Thank you for taking the time to read this interview. If you enjoyed it, you might also enjoy:

• Simone Griffin of HomeFree-USA discusses homeownership and the African American community part one
• Simone Griffin of HomeFree-USA discusses homeownership and the African American community part three
• Your net worth, your gross salary and what they mean
• The difference between being cheap and frugal
• We should bought Facebook and Bitcoin stock: An investing story
• Challenging misconceptions and stereotypes in class, household income, wealth and privilege

If you’ve found value here and think it would benefit others, please share it and or leave a comment.  To receive all of the most up to date content from the Big Words Blog Site, subscribe using the subscription box in the right hand column in this post and throughout the site.  Please visit my YouTube channel entitled, Big Discussions76. Lastly follow me on Twitter at @BWArePowerful, on Instagram at @anwaryusef76 and a the Big Words Blog Site Facebook page.  While my main areas of focus are Education, STEM and Financial Literacy, there are other blogs/site I endorse which be found on that particular page of my site.

Simone Griffin of HomeFree-USA discusses homeownership and the African American community part one

One of the goals of the Big Words Blog Site is to discuss Financial Literacy-related topics, particularly as they relate to the African American community.  A key aspect of wealth building is homeownership.  Coincidentally, for my very first interview for the site, I had the privilege of interviewing the very knowledgeable Simone Griffin of HomeFree-USA.  Simone and I met at the reception for the National Association of Real Estate Brokers (NAREB) at the 2016 Congressional Black Caucus Annual Legislative Conference.

During our interview, Simone discussed how HomeFree-USA was conceived and its mission, why homeownership is critical for African Americans, the effect of the 2008 housing market crash on African American homeownership and wealth, and the overall challenges the Black community faces in securing and maintaining homeownership.  Based on the wealth of information shared by Simone, our very candid and insightful interview will be posted in three parts.

Anwar Dunbar:  First of all, Simone, I want to thank you for your willingness to talk.  When I finished school, I realized that there were gaps in my financial knowledge.  Homeownership and real estate fall under that umbrella so I want to disseminate information that can help individuals, like myself, who want to have a firmer grasp on these concepts much earlier in life.

How did you get involved in real estate?

Simone Griffin: HomeFree-USA is a family business, which my parents started in 1995.  My father was in Mortgage Servicing for almost 20 years before that.  The servicing entity collects your mortgage payments and pays out the property taxes and homeowner’s insurance.  If you fall behind on your mortgage, they’re the ones you speak to.

My mother was in the retail business, and had a marketing background.  My parents noticed how many minorities in the DC area were locked out of homeownership, primarily because they didn’t know that they could afford it.  Many were government employees with very stable jobs, but no one in their family had ever owned a home.  My mother started HomeFree-USA, and my father later joined her, for those who had no one to guide them through all facets of becoming a successful, sustainable homeowner.

Realtors are often the default vehicle for helping people with their credit and debt issues, but that isn’t their job.  Their real job is to help you find a house.  It’s the job of the financial institution to make sure that you’re financially capable of repaying the loan, but as any homeowner knows, there’s far more that goes into owning a house than just the paying the mortgage.  And when you’ve been renting your whole life and don’t know any homeowners, it feels like a lofty feat.

HomeFree-USA walks with you so you know what you’re doing, are confident that you’re getting a good loan, and are buying well within your affordability range.

Ninety-six percent of the people who fell victim to the Housing Boom and subsequent Foreclosure Crisis didn’t see organizations like HomeFree-USA when they were buying their homes.  Had we seen them, there’s a high chance that they wouldn’t have been in those situations.  They worked with realtors and loan officers, but again it’s not their job to educate and prepare.  Their job is to help you get a loan and into a house.  Because there are shady businesses everywhere, you have to have enough knowledge to know when you’re being lead in the right direction and when someone is trying to take advantage.  That’s why HomeFree-USA is in existence.

AD:  Okay, so in summary, what is the mission of HomeFree USA?

SG:  The mission of HomeFree-USA is to:

  • Strengthen people through sustainable homeownership, financial education and coaching;
  • Enhance communities by creating affordable homeownership opportunities through the acquisition, rehabilitation and sale of Real Estate Owned (REO) properties; and
  • Elevate our partners with capacity building assistance and mutually beneficial programs and initiatives.

AD:  Before we move on you mentioned when the DC market was, ‘Affordable.’  For readers who don’t live in the DC area, what was affordable price-wise versus where we’re at right now?

SG:  Most of our homebuyers at that time were moderate income single mothers – making $35,000 to $55,000 a year.  You could buy a home in DC at that time making that kind of money.  Even if you adjust for inflation today, you cannot buy a house unless it’s an affordable set-aside (of which there are few) with that income.  I made $30,000 when I bought my house.  I could do that in the District then: now, no way.  The average income has also increased in DC, but not to the point where it makes homeownership affordable for all.

AD: They say that DC is no longer Chocolate City.

SG:  No, it’s definitely not Chocolate City anymore.

AD:  Why is homeownership so critical for the African American community in the United States?

SG:   First, one of the big misnomers is that homeownership should be used as an investment vehicle.  I don’t necessarily look at it as an investment vehicle, although homes typically appreciate in value over time.  Most importantly, homeownership stabilizes your expenses, which is invaluable when building wealth.  It also gives your family a foundation that they always know they can come home to.

On average, people of color are still paid less than non-Hispanic whites in this country.  I believe Black women are paid 60% less than their non-Hispanic white male counterparts, so we have to create ways to stabilize our income and expenses as much as possible, while continuing to work on income disparities.  Also, homeowners are typically more focused and invested in the state of their community.  If you have kids, the school system becomes really important.  Holding legislators accountable for actions which may affect your home value also becomes really important. There is a direct correlation between the health of a community and the number of homeowners.  You also get the advantage of having a tax write off.

I just don’t want people to look at homeownership purely as an investment.  Some people feel like it’s a given that their house should go up in value, and that’s not true. It’s an investment and investments are risky.  In the long run though, real estate tends to beat even the stock market in returns.

AD:  I was talking to a coworker recently and we were in fact discussing that when you rent, your rent tends to go up every year, and when you have a mortgage it tends to stay stable.

SG:  That’s true.  Your property taxes and homeowner insurance may increase, but if you have a consistent mortgage payment every month, you can stabilize your overall budget and begin to build true wealth.

This interview will continue in parts two and three of Simone Griffin of HomeFree-USA discusses Homeownership and the African American Community.  To read some more of Simone’s financial writings, visit her blog at www.moneymagnet.homefreeusa.org.  She can also be contacted directly at moneymagnet@homefreeusa.org.  A special tank you is extended to Simone Griffin and HomeFree-USA for participating in this interview and also for providing the picture for this post.

Thank you for taking the time to read this interview. If you enjoyed it, you might also enjoy:

• Simone Griffin of HomeFree-USA discusses homeownership and the African American community part two
• Simone Griffin of HomeFree-USA discusses homeownership and the African American community part three
• Your net worth, your gross salary and what they mean
• The difference between being cheap and frugal
• We should bought Facebook and Bitcoin stock: An investing story
• Challenging misconceptions and stereotypes in class, household income, wealth and privilege

If you’ve found value here and think it would benefit others, please share it and or leave a comment. To receive all of the most up to date content from the Big Words Blog Site, subscribe using the subscription box in the right hand column in this post and throughout the site. Pease visit my YouTube channel entitled, Big Discussions76. Lastly follow me on Twitter at @BWArePowerful, on Instagram at @anwaryusef76, and at the Big Words Blog Site Facebook page. While my main areas of focus are Education, STEM and Financial Literacy, there are other blogs/sites I endorse which can be found on that particular page of my site.