The Financial Journey is a unique series focused on financial education and opportunities. These stories have been created through a strategic partnership between Wells Fargo and Word In Black.
Aspiring homeowners in select areas of eight metropolitan areas— Atlanta, New York, Washington, Philadelphia, Charlotte, Baltimore, Dallas, and Minneapolis-St. Paul, —may be eligible for a new downpayment assistance program recently announced by Wells Fargo. The Homebuyer AccessSM grant offers $10,000 for eligible borrowers who live in or are purchasing homes in certain underserved communities. The grants are a part of Wells Fargo’s effort to help expand generational wealth through homeownership. These grants help to clear a common hurdle to homeownership for many families – having a downpayment.
Since the Fair Housing Act passed 50 years ago, the overall homeownership rate has grown slightly. But there are still disparities. The current homeownership rate in the United States is 66%. Among Black Americans, it is 45.8%.
In an interview with Word In Black, Chuck Bishop, Head of Diverse Segments for Home Lending for Wells Fargo, shares that homeownership is central to building wealth, and offers some guidance to those interested in purchasing a home.
WIB: Let’s talk about the ideal conditions for a family to own a home in the United States.
Bishop: Homeownership is often the largest financial transaction any family can make. It’s also the beginning of the opportunity to accumulate and have legacy wealth. Everyone’s financial situation is unique to them. Families have their own thoughts about the type of home they want or even where it’s located. Because of these differences, it’s important to speak with a mortgage professional to begin the homeownership journey. Ask questions like what types of loans are available; if there are programs to assist with downpayment or even closing costs; what the requirements are for loan approval. Aspiring homeowners should understand as much as they can about the homeownership journey before beginning. It could make a difference in the kind of experience they have.
WIB: What are common myths about homeownership?
Bishop: Myths can create perceived hurdles to homeownership. That’s why education about the process is so important. One of the most common myths is that there is a 20 percent downpayment requirement. Borrowers should be prepared to make a downpayment, but there are programs that allow three percent down and, in some cases, the down payment can be a gift or grant. Another myth is that perfect credit is required for home loan approval. You don’t need an 800-credit score to qualify for a mortgage and many programs, particularly for first-time homebuyers, provide flexible credit guidelines. For example, some lenders consider non-traditional credit items, like positive payment histories for utilities and rent. Another common myth is that you need to have a lot of money to purchase a home. You do need to show a lender that you can afford the home you want to purchase. Many lenders have programs that are aimed at assisting low- and moderate-income buyers, including Wells Fargo. The recently announced Homebuyer Access grant is one example.
WIB: Can the homeownership gap be closed?
Bishop: A lot of work needs to be done to close the homeownership gap, and it must be a collaborative effort. The gap cannot be closed from the work of one bank or one organization. It must also include nonprofits, the government, industry professionals and others. It’s concerning that in the last 50 plus years that the Fair Housing Act was created that we haven’t seen sustainable homeownership growth for African American communities, much of it caused by systemic inequalities in housing and finance. But, at Wells Fargo we are dedicated to doing our part to help make a difference and believe a program like the Homebuyer Access grant is one way to do it.
WIB: What do you say to people who want to buy, but must rent at this time?
Bishop: Preparation is key. If an aspiring homeowner is not ready to buy but knows that’s a goal, it’s good to speak with a mortgage professional or even a nonprofit housing agency to understand what is needed not only for loan approval but sustainability to stay in the home long term. Don’t give up on the goal of homeownership even if it may take longer than you thought. It’s too important and a key to building wealth and leaving legacy for families.
The newest Homebuyer Access grants from Wells Fargo are an expansion of the company’s Special Purpose Credit Program, which it announced last year. Find more information here about the new Homebuyer Access grants, including areas of eligibility.