Homeownership for Hispanics/ December 6th, 2018
Becoming a homeowner has been part of the “American Dream” for many years. Purchasing a house for the first time can bring a mix of positive and negative emotions. This is particularly true for Hispanics in the United States, especially for first-generation immigrants who don’t understand exactly how the home buying process works. They face three main challenges: credit rating, down payment and, the most important one, the language barrier.
Having good credit is necessary for obtaining a loan. This a challenge for many first-generation Hispanics since many don’t understand how the credit scoring model works and why it is important to build credit.
The other issue that first-generation Hispanic immigrants face is obtaining sources for a down payment. Most mortgage lenders request a down payment of either 3% or 5% of the purchase price depending on the program. There are programs that don’t require a down payment, but the monthly payment will be very high. Since some new immigrant families live paycheck by paycheck and haven’t set up a spending plan, saving for this down payment can be difficult.
The last and most important issue is the language barrier. The terms and conditions of a mortgage loan can be difficult to understand for a native English speaker, let alone someone learning English as a second language. There are a few lenders that have Spanish-speaking representatives and Mortgage Loan Officers, and that representation is increasing, but the need for more bilingual staff in the financial services industry is increasing.
Here are a few suggestions for Hispanic credit union members to address these challenges:
1. Go to your credit union and ask for a credit consultation. The representative can take an in-depth look at your credit report and find ways for you to improve it. It is important to maintain a good credit score because it will determine the cost that you will pay for different types of loans.
2. Create a spending plan and set short- and long-term financial goals. As mentioned before, most programs require a 3% or 5% down payment for a house. For example, if you want to purchase a $200,000 house, 3% would be $6,000, and then you would pay around $1,500 to $2,000 in closing costs. That means you need a total of $8,000 to complete the sale. How will you get those funds? By setting up your financial goals and creating a budget! Don’t overspend your money by going out to eat or buying new clothes. Instead, use some of those funds to save for your down payment.
3. If language is a barrier, bring an interpreter with you to your meeting with the loan officer. Ask if there is a bilingual staff member at a financial institution or bring a family member that speaks English well. If there are any home buying seminars provided in your community, attend them to get more information. Also, if you choose a Mortgage Loan Officer who is not with your credit union, make sure he or she is a person of trust. It is common for underrepresented communities to be targeted by scams.
It is important for Hispanics to be proactive and ready when purchasing their house. Purchasing a house for the first time is part of the American Dream and everyone in this country deserves to have that dream come true.
Note: This article is also available in Spanish.