Buying a Home as a Black Woman: Tips and Advice

Ever since I can remember, I’ve wanted to own a home. Growing up, I dreamed of being able to decorate my room and paint my bedroom walls any color I wanted. During college, I became interested in personal finance and began learning how homeownership can be a tool for building wealth and passing it on to your children.

At 26 years old, my husband and I were excited to become first-time homebuyers in the Midwest. Her husband works as a temporary employee for a transportation company, and I was self-employed as a freelance writer for a while, and my income was listed on two years’ worth of tax returns. Since I paid off both my car loan and student loan, I had some extra cash flow and started saving for my dream.

black family been at a disadvantage for a long time Having faced discrimination when it came to the housing market, we thought it was important to be aware of the circumstances leading up to the process. I also hope that by sharing my experience buying a home in my mid-20s, other black women will learn what they should be aware of when purchasing a home.

I was realistic about the economic and institutional challenges

Growing up, I saw firsthand the economic and institutional challenges that many Black families faced. Both of my parents grew up in single-parent families in inner-city Chicago. My father was one of six children and grew up in a very poor housing project.

Having lived in both Chicago and its suburbs during our childhood, we have seen how specific opportunities and access to homeownership have varied since then. In 1968, fair housing law By 1970, black homeownership had increased to 41 percent. But in 2020, that percentage was small. 43.4%. This is a surprisingly small increase over 50 years. On the other hand, there is a persistent gap in wages and wealth between races. There have been reports of bias within the real estate industry. While contributing to these numbers, everyone also has personal barriers to homeownership.

In my case, it was mainly due to financial challenges and a lack of support and resources. When we began our homeownership journey, my husband and I were not yet completely debt-free and had no financial support from our family for a down payment or home improvements. At the time, we still had credit card debt and my husband’s student loans, which were about $14,000 at the time.

At first, I didn’t know many homeowners and didn’t know what resources were available. As a result, we made some costly mistakes. Despite these barriers and challenges, homeownership is still very much within the reach of anyone. Below is what I found very helpful in my own experience.

I sought education in homeownership

If you are a first-time homebuyer, or the first in your family to own a home, homeownership education is critical. I learned that my mortgage lender was holding a course in my local park district and applied to attend. In this one hour class of hers, I learned a lot about the process and what I need to do to take the first step.

Then my husband and I started researching homes online and deciding how much we could afford. I also went to a few open houses to practice home appraisals, which is how I met a real estate agent.

We learned a lot about home buying, but one of the mistakes we made was not evaluating the property thoroughly enough and negotiating the issues found during the home inspection. Looking back, I think we were so excited about the purchase that we underestimated some of the repairs that would be needed, such as waterproofing the living space, removing expensive trees, and buying new appliances. . Now I wish I had requested those credits.

Worked on credits and other requirements

Long before I decided to buy a home, I started improving my credit and paying off my debt. I met her husband in college and encouraged him to work on her own credits as well. Initially, he didn’t have a credit card or utility bill in his name. Now we both have his score over 800.

If you’re buying a home with another person or co-borrower, the lender will consider both people’s credit scores and even focus on the lower of the two. We didn’t want a “weak link” to develop between us, so we both focused on keeping credit card balances low and paying off debt.

I graduated in 2014 with about $20,000 in student loans, which was great because I was able to pay it off before I got pre-approved to buy a house. Lenders also look at your debt-to-income ratio, which is the total amount of your debt payments relative to your income, to determine whether you can afford to take on other debts, such as a home payment.

I researched loan options and assistance programs.

In the homeownership class, we learned about the different types of loans and ended up choosing between FHA or conventional loans. We ended up getting a conventional mortgage, but we also asked our lender about down payment assistance programs in our state. We had some money for a down payment, but we also wanted to save money for closing costs, initial home repairs, and maintenance.

Luckily, we were able to qualify for an assistance program that works just like a grant, as long as we stay in our home for at least five years. Each month (until 5 years have passed) a portion of the down payment subsidy will be waived.

One thing that surprised us was that the down payment assistance program required mortgage interest rate increases. Interest rates at the time were about 3.5 percent, but I had to agree to a 5.5 percent interest rate. Although I wasn’t happy about the increased cost of my loan due to rising interest rates, I thought it was worth it at the time to get down payment assistance in exchange. He also knew he wouldn’t be able to live in the house for the next 30 years and that he could always refinance after five years if interest rates went down.

I created a budget and got organized financially.

Buying a home can be stressful, even once you’re pre-approved, as lenders continually ask for check stubs and bank statements. I’m self-employed, so I had to file two years’ worth of tax returns.

We also held weekly budget meetings to pay close attention to where our funds were being spent overall. We usually sat down on Fridays to discuss upcoming bills and expenses for the week and track debt payments and savings. This allowed me to stay organized and reconcile transactions within my accounts whenever I needed to provide financial institutions with up-to-date financial information.

It was also great for getting into the habit of prioritizing your goals while staying accountable and avoiding wasteful spending like unused subscriptions. I used to pay $125 a month for kickboxing classes, and shoe and wallet subscriptions were about $40 a month. My husband and I decided to make our own lunches to take to work every day, and to save money, we didn’t exchange gifts with our families for the holidays that year.

I also tried to take on extra jobs to make money, and my husband drove for Uber in his spare time. We intended to save the net income we earned from our side hustle rather than spend it all.

What really helped me buy a house at 26 was lowering my expectations. We knew what we were looking for was a starter home that probably didn’t tick all the boxes. We found a 3 bedroom, 1.5 bath ranch style home that ended up being perfect for her family of 3. Although they didn’t get the two-car garage and basement they wanted, they still had enough money to make their monthly payments and still have money left over to save so they wouldn’t be house poor. We lived in that house for four years before selling it. Even in that short period of time, the value of our home increased by about 35%.

My best advice for other Black women considering buying a home.

My advice to Black women and other first-time homebuyers is to position yourself financially and emotionally. Look for homeownership education and mentors who have been there before. When it comes to finances, create a budget and pay off your debts as soon as possible.

Do your research on agents and lenders. Don’t let fear of discrimination deter you from buying a home. However, if you feel that you have been unfairly prejudiced or treated because of your race, national origin, gender, or religion, please do the following: file a complaint Report housing discrimination to the U.S. Department of Housing and Urban Development. This will initiate an investigation and help you seek fair treatment and possibly legal action.

Most of the people we worked with during the home buying process were great and knowledgeable, but we know it’s not for everyone, so we’re grateful that these resources exist. This whole process is worth it if your dream is not only to own a home, but to pursue a comfortable lifestyle that you can afford.