For decades, buying a home wasn’t just a goal, it was an expectation — the foundation of the American Dream. And, it was relatively easy to achieve. According to a recent study by real-estate firm Unison, in 1975 the average person could save up enough for a 20-percent down payment in nine years.
While owning a house remains the single best way of accumulating wealth, it seems much further out of reach today. In the current market, the Unison study reports it would take 14 years to save that 20 percent down payment. In the tougher Minneapolis housing market, it would take 17 years.
It’s even worse for African Americans. In the last 20 years, the homeownership gap between Blacks and Whites has held strong at 30 percent.
Understanding the housing market, particularly since the 2008 crash, has become increasingly intimidating. Finding resources, tips and programs has grown complicated and overwhelmingly cumbersome to the novice or first-time buyer.
That’s where the Minnesota Homeownership Center (MHC) comes in. “It’s not that hard,” said Bill Gray, MHC stakeholder relations director.
“Is the process confusing? Yeah, the process is crazy town. [But] with somebody to walk you through it for free, you can pull it off,” said Gray.
MHC was created to show people with low incomes or those sidelined from homeownership by discrimination that buying a home is achievable, as well as both fiscally practical and advantageous.
For 25 years, the nonprofit has helped people buy homes around the state with such services as an intensive eight-hour homebuyer’s course, along with referrals to advisors and program specialists — all for free.
Trading myths for welcome mats
The organization provides “education and preparation from unbiased sources,” said Gray. “This isn’t education being given by a bank.” MHC works to help prospective buyers see through barriers that may prevent them from moving forward.
“Don’t fall for the myths that cause many people to believe ownership is not for them,” said MHS executive director Julie Gugin. “There’s a wide variety of community-based supports for those ready to start the homeownership journey.”
The biggest misconception is that buyers still need to come up with a 20 percent down payment to buy their home. “Who has $50,000 laying around?” asked Gray.
Instead, the MHC course equips participants with knowledge and resources necessary for successful homeownership. This ranges from how calculating how much house one can afford, learning to read and comprehend real estate-related information, and learning to interpret a house inspector’s evaluation.
Learning such vital information can do wonders in the home-buying process, said prospective homebuyer and MHC class participant Stacie Redmond. The 34-year-old sales associate and mother of three began her housing search shortly after her twins were born, which crowded their two-bedroom South Minneapolis apartment.
Redmond followed tips from the course, like building a $3,000 rainy-day fund to prepare for something like the hot water heater or other large appliance needing to be repaired or replaced — even before making an offer on a home.
Through the course, she was also referred to an MHC partner housing advisor who pulled Redmond’s credit report and identified tips for cleaning it up. The advisor then introduced her to a loan officer who informed her of a network of Minneapolis homebuyer programs.
“Everyone’s coming from a different place,” said Mary Kaluza, a homeownership advisor with MHC partner Lutheran Social Services.
Kaluza said advisors begin finding out what steps a prospective homebuyer has taken so far, what their goals are, what their finances look like, and what resources and programs are available to them.
After getting her finances in order, Redmond was ready to buy a house. But that was only half the battle; then came entering the market. She’s been on the hunt for nearly a year, seeing over 50 homes.
Redmond said she feels it’s actually harder to finally land a home than it is to get in a position buy one. In her experience, sellers see multiple offers almost instantly after putting the house on the market. Her latest lesson, she explained, is not just being in financial position but also being ready to make a move.
But she is hopeful in her search: “The market is switching from a seller’s to a buyer’s market,” said Redmond.
Kaluza said the largest misconception people have coming into homeownership is just how long it takes to become “mortgage ready.” Echoing Redmond, that’s often the easier part.
“Right now, housing prices are so high that it’s really tough for people,” said Kaluza, adding that “houses are moving very, very quickly.”
She said she’s heard “over and over again” from people who find a house, make a quick offer, and still hear back that the house is taken. Kaluza heard of an instance in which a house was put on the market and then taken off within two hours.
In other cases, the competition cranks up the original price of the house, forcing people to drop out of the bidding.
Kaluza said, “People need to be ready to pounce on a home and submit an offer,” but also noted the trend toward making rushed bids is also “really concerning. Somebody might jump on an offer and might miss important steps.”
Buying a home is a long-term investment. Doing something ill-advised, like rushing into buying more house than the buyer can afford, can make life much harder down the road, Kaluza said.
Though people are more cautious now, she noted that many people fell into this trap during the 2008 housing bubble. “In general, I would really urge people to be patient.”
In the meantime, keep saving, and protect your credit by making payments on time and refraining from opening new lines of credit, Kaluza advises. “A home is still middle America’s biggest source of wealth. And it’s important. You don’t want it to be a drain. You want it to work for you.”