Overcoming fears of homeownership

Toshiba Hill never thought homeownership would be in her future. Now, for the mother of four, it’s in reach.

“I always thought I could never own a home because I saw the process and people saying you need to have this, this, and this,” she said. “Taking the workshop class put me at ease and made me more confident.”

Homeownership is a big goal and one of the most complicated financial transactions most people will ever make. The enormity of buying a home, combined with the fear of making an uninformed or bad decision, often keeps people like Hill from taking the leap. Yet getting past those fears, especially for Black households, is crucial to long-term economic security.

Research from a few years back estimates that the median wealth of Black households would rise by more than 450% if they owned homes at the same rates as whites.

Nationally, only 44% of Black individuals own a home, compared to nearly 73% of white individuals. In Minnesota, the disparity is even greater. In a 2015-2020 study, the Prosperity Now Scorecard found that 77.5% of white households in Minnesota own their homes, compared to just 30.5% of Black households. That disparity is even greater in the Twin Cities.

So, what does this mean in dollars? The Federal Reserve reports that Black wealth grew, on average, from $27,970 to $44,890 between 2019 and 2022. Yet, Black Americans still lagged significantly behind other racial and ethnic groups. During the same timeframe, Latino households, on average, had $62,000 in 2022 in wealth, white households $285,000, and Asian American households $536,000.

Three major fears often are cited as reasons otherwise qualified Black homeowners fail to invest in owned housing.

Fear #1: My credit isn’t good enough.

Credit scores are not fixed and can rise and fall depending on an individual’s actions. Homeownership advisors are available across Minnesota to help prospective homebuyers clean up, repair or build their credit before applying for a loan. 

The advisors are part of a network supported by state and federal grants, meaning their services are free. They take the mystery out of credit scores to put prospective homeowners on a successful path toward sustainable homeownership.

Fear #2: I need to make a 20% down payment.

You don’t need a big down payment to buy a home. Sometimes, the down payment can be less than a rental deposit. Many lenders offer products with low down payments (3.5% or less). Many Minnesotans also are eligible for downpayment or closing-cost assistance provided through state programs. 

These programs have eligibility requirements, often in the form of education classes. It’s recommended that prospective homeowners understand and fulfill these requirements before going house shopping.

Fear #3: I don’t earn enough money.

Homeownership may be more affordable than paying rent depending on where you want to live. Compared to rent, owning provides an opportunity to build equity and wealth.

Path to homeownership

The path and time it takes to buy a home are different for everyone, but with the help of agencies like the Minnesota Homeownership Center (MNHOC), having a place to call your own is more likely a reality now than ever.

MNHOC, a U.S Housing and Urban Development (HUD) Intermediary, provides homebuyer education counseling services via a network of homeownership advisors embedded in community-based organizations across Minnesota. It also offers homebuyer education classes, called Home Stretch, that take prospective homebuyers through the process — from finding a realtor to picking up their keys.

MNHOC recommends that all first-time homebuyers take a homebuyer education course, noting that completion of such a course is a requirement of the loan approval process for first-time and first-generation homebuyer mortgage programs. The Center’s Home Stretch class curriculum is approved for this purpose.

If an in-person course isn’t possible, MNHOC also offers an online course (go to mnhoc.org), but lender acceptance can vary.

“The Home Stretch course is designed to teach those who want to buy a home everything about the process in an engaging way, said Bill Gray, director of stakeholder relations with MNHOC. “We bring in realtors, lenders, home inspectors and others to share their knowledge on how the process works — and how to make the process work for you.

“The education class goes hand-in-hand with the one-on-one advisors our network provides,” he added. “Our goal is to make the process easy to understand but prepare homebuyers in a comprehensive way for sustainable homeownership.” 

Last year, more than 2,700 people took one of 272 Home Stretch courses offered across the state. More than 95% of participants said it boosted their confidence in homebuying and readied them to purchase a home. Additionally, more than half of all people who engaged one-on-one with a homeownership advisor went on to buy a home.

“I got a lot of information I didn’t know,” said Hill, who recommends the Home Stretch program to others looking to buy a home. “The instructors there gave me accurate information I was thinking about or wondering about. 

“I didn’t need to ask any questions, because other people there were in the same place. We all benefited from the class. And I recently connected with a homeownership advisor, and I’m working with her to save money and buy a home sooner than later.”

Cynthia Moothart welcomes reader responses to cmoothart@spokesman-recorder.com. 

In the latest Tracey’s Keepin’ It Real podcast, MSR Publisher and CEO Tracey Williams-Dillard talks homebuyer education programs with Theressa Ruiz, homeownership services program manager with PRG, and Melissa Pugh, financial coaching and homeownership manager with Project for Pride in Living (PPL).