My husband and I recently closed on a new house in Wooster, Ohio. We’ll be moving in a couple of weeks. The home-buying process went smoothly except for the obstacles set in our path by mortgage underwriters. First, we plan to put our current house on the market after we move. The house needs renovation before being put on the market — and we have three dogs. Enough said. Second, we’re semi-retired; we have sufficient funds in assorted accounts, but our income stream was deemed insufficient for temporarily covering two mortgages.
The lenders insisted that we draw a certain amount of money every month from various IRAs and deposit it into a designated account to demonstrate that we can cover monthly mortgage obligations. As soon as our present house sells, that will no longer be necessary. Done and done.
Or so we thought. “You have to deposit enough for three years’ worth of payments, and it must come from only one account.”
Um, we have 30 months’ worth in one account. Can’t we draw the last 6 months from a second account if necessary? “No. The money must all be in one account, covering the 36 months we require.”
In other words, you won’t give us a loan unless we prove that we have more money in one account than the purchase price of the home, and we’re willing to throw away several thousand dollars in penalties and taxes in order to achieve that figure? “Right!”
We almost washed our hands of the whole deal. Our mortgage originator finally talked common sense into somebody’s head. A compromise was reached, we signed on the dotted line, and — for the fifth time — we’ll be homeowners.
Carroll County Daily Headlines
When I read a recent story in the Carroll County Times about the low level of home ownership by African-Americans, I winced. We’re white, middle-class homeowners, with good credit scores and decent savings. If it was this hard us to get a mortgage, how difficult is it for first-time minority applicants to buy a house?
I’ve read several reports focusing on low home ownership rates by African-Americans in particular, and the cascading series of challenges and difficulties that presents to them. Although home ownership does rise as education level rises, black Americans at all levels of education lag significantly behind white Americans. Even when other factors are taken into consideration, they are more likely to be denied mortgages.
The net worth of African-Americans, on average, is about $9,000, compared to $120,000 for the average white household. Most families’ net worth is tied up in their home; rent is money out the window, but a mortgage is money in the bank. Far less wealth, therefore, is passed on to the next generation of black Americans, and far less money is available (in the form of home equity) for tuition, retirement or emergencies.
Additionally, minority communities populated by renters may contend with poor maintenance by often-absentee landlords, neighborhood blight, and lack of community amenities and businesses. They’re sometimes vulnerable to takeovers and “gentrification.” Conversely, pride of ownership often leads to improvements in the community; homeowners are even more likely to be able to start businesses there.
There are many reasons, some legitimate, others questionable, for why African-Americans struggle to obtain mortgages. One factor is a profound over-correction to the mortgage lending crisis of a decade ago, in which sub-par loans were approved in irresponsible fashion. Mortgage institutions are terrified of risk, and loan officers have almost no leeway when dealing with the realities of good people with slightly odd finances.
I want to research this further. There’s an informative article on the Housing and Urban Development website. It discusses the assistance happening in partnership between the Federal Housing Administration and foundations, nonprofits, business groups and community organizations. Help includes assistance with down payments, closing costs, vouchers, forgivable loans, and “soft” second mortgages.
For first-time borrowers, especially families with children, assistance with a down payment and closing costs is a powerful and effective way to increase successful first-time home ownership. I hope that there are many organizations, entertainers, sports figures, and other influential public figures, who can use their “bully pulpit” and their resources to help extend these programs in their home towns and elsewhere. It will accomplish untold good — in the short term, and for the next generation.