Homeownership is considered a key marker of the American dream, yet for many Black Americans, it is out of reach. Historically, Black communities have faced discriminatory lending practices, redlining and housing policies that have hindered their ability to purchase homes.
To increase Black homeownership, it is critical to address systemic issues such as fair housing laws, financial redress and inclusive zoning. Increasing Black homeownership is a social justice and economic growth strategy that can benefit everyone. Mortgage professionals can harness their collective expertise and influence to create change.
Through accessible loans, policy changes, affordable housing initiatives, credit score reform and community investments, mortgage professionals can make homeownership a reality for more Americans. More families can move closer to the American dream if lenders, originators and credit counselors work together to dismantle systemic barriers and promote inclusivity.
Consumers are ready for change. Despite systemic barriers and bias in the housing market, a recent survey revealed that Black consumers (47%) are far more likely than whites (26%) to think that homeownership will become an option for them.
The online survey was conducted this past June by the National Foundation for Credit Counseling and was funded with a grant from Wells Fargo. The survey focused on 2,000 U.S. renters with household incomes of $75,000 or less. The parameters of the survey ensured that Black renters represented 25% of respondents.
The results were clear: Black consumers are open to homeownership education within their communities (e.g., workshops, financial counseling and affordable housing initiatives). Financial professionals of all types should look to connect them with the tools and resources to help them reach their goals.
Credit counseling can play a significant role in helping people secure a mortgage. Counselors are financial advocates who work to empower consumers to take charge of their finances through one-on-one reviews of credit card debt, student loans, housing decisions and overall money management. Connecting borrowers with certified credit counselors can go a long way to helping them achieve their goals.
Mortgage professionals can support multicultural consumers in many ways along their path to homeownership. Buying a home is a major life decision that, for many multicultural families, involves everyone. Elders and children alike may attend meetings, ask questions, translate and offer opinions.
Mortgage professionals should listen to, learn about and embrace the unique cultural nuances of their clients. This can help make a traditionally stressful process less taxing. While cultural competency is good, cultural fluency is better.
Mortgage professionals should also confront the elephant in the room: racial bias. Along the journey to homeownership, your clients of color have likely encountered subtle and/or overt racism. Not only does this put them on guard, it also increases their skepticism of the lending process and makes the building of trust more challenging.
Acknowledging their lived experiences and fears is the first step in breaking this cycle. Avoid reflexive responses (e.g., “maybe that’s not what they meant”) in favor of statements like, “I hear you and acknowledge your experience,” to establish rapport.
Tell your clients about mortgage products designed to increase homeownership rates, especially among people of color. These programs aim to address the historic and systemic barriers that have limited their access to traditional home financing options. Such programs may have lower downpayment requirements, lower interest rates, flexible credit requirements and community support.
While retail banks issue the majority of home mortgages, there are a variety of funding sources that may better suit your client. Provide them with options that include government-supported initiatives. These can include mortgages through the Federal Housing Administration or U.S. Department of Veterans Affairs, as well as credit encouraged through the Community Reinvestment Act. Offer a complete overview of the loan products available to them.
Sometimes it’s best to press pause. If the client is simply not ready for homeownership, refer them to an accredited nonprofit housing and credit counseling professional who can work to get them financially ready. Counselors can work with clients on customized debt management plans that are designed to help them reach their goals.
These plans may include a review of the credit report, assessing their financial accounts, and preparing a customized budget to help them pay down debt and address areas of concern. These actions work to improve credit — and a higher credit score can make individuals more attractive to lenders, potentially qualifying them for better loan terms and interest rates.
Importantly, if a client isn’t approved for a loan product today, don’t give up on them. The current deficit on their financial record need not be permanent. Consumers often visit with credit counselors after being rejected for a mortgage. It’s best to encourage them to think of it as a “not yet” instead of a “no” and to get to work on reversing the trend.
Consumers need to establish a clear financial plan to better manage their expenses, pay down debt, and save for a downpayment and closing costs. These are essential components of the homebuying process.
Purchasing a home is a significant milestone in anyone’s life. It represents financial stability, a sense of accomplishment and generational wealth. Credit counselors and the mortgage industry can work together to help reduce homeownership disparities and promote economic empowerment in Black communities. ●