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Homeownership has long been a reliable and valuable investment for many Americans. The Black homeownership rate in the U.S., however, stands at just 44% – the lowest among all racial groups according to the National Association of Realtors.
A lack of access to credit, a lack of understanding about the homebuying process, and coming up with the upfront cash needed for a down payment and closing costs are among the barriers many Black Americans face on their journey to homeownership. That’s why it’s important to consider your options and seek out resources to help navigate the homebuying process.
For National Homeownership Month, Gretchen Newswander, Area Home Lending Manager for Chase, shared five important things to consider before purchasing a home.
- Come prepared and don’t stress about rates.
The best time to buy a home is when you’re financially ready. Worry less about the current economic environment and more about your own preparedness for homeownership, including fully knowing and understanding your financial situation, debt level, credit score, savings and investment positions.
- Save for a down payment.
A down payment is what you pay upfront toward the cost of your new home; it’s the difference between your mortgage amount and your purchase price. The more you can put down, the less you’ll be borrowing from a lender. However, it is a myth that you must put down 20% of the purchase price—low down payment loan options are available—in some cases, as low as 3%. Keep in mind that if you put less than 20% down, you may be required to pay private mortgage insurance. Make sure to speak to a Chase Home Lending Advisor to understand the options that may work for you.
- Evaluate loan options and shop around.
There are many different types of home loans available, and having an experienced Chase Home Lending Advisor on your side can help you make the right decision for you. Here are the most common types of loans:
- A conventional loantypically calls for a higher credit score to qualify and can be accessed through private lenders, including banks, credit unions, and mortgage companies.
- An FHA loanis backed by the federal government. These loans can help potential buyers with lower credit scores who wish to keep their down payment costs low. Buyers using an FHA loan are required to pay monthly mortgage insurance premiums, regardless of the down payment amount.
- A VA loan is a mortgage the U.S. Department of Veterans Affairs offers to servicemembers, veterans and surviving spouses. VA loans can have favorable terms, including no down payment.
- Your financial institution may also offer additional loan options. An example is Chase’s DreaMaker mortgage, which has flexible credit guidelines and requires as little as 3% down.
Lastly, no matter the loan type you chose, it’s important to shop around for the best offer, both in terms of rate and other fees you may have to pay. All lenders and mortgages are not the same. For instance, did you know that, on average, homebuyers save more in mortgage fees with a bank like Chase, compared to a non-bank?
- Use tools to help.
It’s important to look into the financial resources available to help you purchase a home. Chase offers a homebuyer grant of up to $7,500 to buyers purchasing homes in eligible areas. These grants are offered in low- to moderate-income communities and neighborhoods that are designated by the U.S. Census as majority-Black, Hispanic and/or Latino. The grant can be used to lower the interest rate and/or reduce closing costs or down payment. You can check grant eligibility online with the Chase Homebuyer Assistance Finder and also discover other financial assistance that may be available.
For added confidence during the closing process, Chase also offers a Closing Guarantee, which promises an on-time closing for eligible customers in as soon as three weeks, or the customer will receive $20,000 (for a limited time through July 27, 2024) if they qualify. The closing guarantee helps buyers close quickly, which can be very helpful in a competitive market.
- Get educated.
Buying a home can be the achievement of a lifetime, but being able to sustain homeownership over time is equally, if not even more, important. For the best chances of success, homebuyers should not only get educated about the buying process, but also understand the ins and outs of homeownership after the home is purchased. Chase’s Beginner to Buyer podcast and its Homebuyer Education Center offers tips and first-hand experiences on homebuying, selling, and ownership.
Homeownership offers many benefits beyond just a place to live—it’s a time-tested way to start building personal and generational wealth. That’s why it’s never too early to start working toward your dreams of homeownership. After all, it’s an investment in your future.
