Rethink Everything About Helping Underserved Consumers Achieve Homeownership
This month, our mortgage and finance experts provide loan officers with practical strategies and tips on connecting with minority and low-to-moderate income consumers who would like to become homeowners.
Empowering Underserved Consumers with Down Payment Programs to Achieve Homeownership”>
Brian Vieaux, President and COO, FinLocker
Empowering Minority Consumers Through Financial Education
Brian Vieaux, President and COO, FinLocker
Hispanic Homeownership Trends Shaping the Future of the U.S. Housing Market
Jeremy Potter, Founder, Next Belt Strategies
Overcoming Affordability Challenges and Preparing for a Mortgage: A Path to Homeownership for Minority Communities
Heather Kyle, Loan Officer, Waterstone Mortgage
Building Relationships with Hispanic Homebuyers
Rob Chrane, Found & CEO, Down Payment Resource
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Empowering Underserved Consumers with Down Payment Programs to Achieve Homeownership
Brian Vieaux, President & COO, FinLocker
One of the most impactful ways for loan officers to build rapport and establish trust in your community is by becoming informed of local down payment assistance and grant programs. This knowledge is particularly valuable when working with minority and low-to-moderate income homebuyers who may face unique financial challenges, especially when they are first-generation homebuyers.
Here’s how to leverage this knowledge:
Become a Local Expert: Dedicate a few hours to researching down payment assistance and grant programs available through companies, municipalities, and even religious organizations in your area. Start with HUD, then google “down payment assistance programs in [your state] and [your city]. A quick search on my city, Detroit, resulted in several pages of city, county and state-specific programs.
Build Trust as a Mortgage Advisor: By understanding these programs, you demonstrate your commitment to finding solutions for all potential homebuyers, especially those struggling to qualify for traditional financing.
Tailor Your Approach: Different programs cater to various needs and situations. By understanding eligibility requirements, amount of assistance provided and application processes, you can better match your clients with the most suitable options, increasing their chances of achieving homeownership.
Enhance Your Community-Focused Marketing: Use your expertise to create content for your social media, advertising, newsletter and community marketing efforts. Highlight specific programs to attract potential homebuyers who may not have considered homeownership possible.
Empower Through Financial Education: Many in underserved communities may lack the time or resources to research these programs themselves. By sharing your knowledge, you’re empowering them with valuable information and opening doors to homeownership.
By educating yourself on down payment assistance programs, you’ll not just grow your business – you’ll make a meaningful difference in your community, one homebuyer at a time.
Empowering Minority Consumers Through Financial Education
Brian Vieaux, President & COO, FinLocker
If I were a loan officer today, I would lead with financial education to build trust and rapport with not just minorities but all consumers. Rather than immediately seeking business by talking about loan products and mortgage rates, I would use my financial knowledge and offer financial tools and resources to establish credibility and begin to build trust. Many minority consumers face additional barriers to homeownership, such as being the first person in their family to buy a home or grappling with student loan debt, so financial education has the power to be more than a just gateway to qualify for a mortgage. It can be transformative, inspiring change and uplifting lives long before the journey to homeownership begins.
Using Financial Education to Bridge the Homeownership Gap
Recent data from the Census Bureau paints a stark picture of homeownership disparities. In the fourth quarter of 2023, the homeownership rate among White Americans stood at 73.8%, significantly higher than Asian Americans at 63%, Hispanic Americans at 49.8%, and Black Americans at 45.9%. The gap is even more pronounced among Gen Z, with White homeownership at 46.6% compared to just 15.8% for Black Gen Z adults. These statistics underscore the need for financial education tailored to minority consumers to help close the gap and provide them with the knowledge and tools to become homeowners.
Addressing Financial Literacy Challenges
The lack of personal finance knowledge is a significant financial challenge for most people. It’s not just a concern for 29% of Black consumers, 24% of Asian American and Pacific Islanders, and 22% of Hispanic consumers. Surprisingly, 36% of White Americans also report this as a challenge, highlighting the universal need for financial education.
These statistics highlight the need for loan officers to position themselves as trusted advisors. This approach not only helps bridge the knowledge gap but also builds the rapport necessary to begin a successful transactional relationship.
Leveraging Social Media for Effective Outreach
To effectively share financial education, loan officers must meet minority consumers where they are—on social media.
YouTube reigns supreme across all groups, with usage rates of 93% among Asian Americans, 86% among Hispanics, 82% among Black Americans, and 81% among White Americans. The age group most frequently using YouTube is between ages 25 and 34, then 35 to 44.
Instagram is a hot spot for Hispanic (58%) and Asian (57%) adults, with lower but significant usage among Black (46%) and White (43%) adults. Two-thirds of Instagram users are Gen Z and Millennials.
TikTok shows varying popularity: 49% of Hispanics, 39% of Black Americans, 29% of Asian Americans, and 28% of White Americans use the platform. If your target is Gen Z, 78% are on TikTok.
Facebook maintains consistent usage across groups (64-69%), while Reddit sees higher adoption among Asian Americans (36%) compared to other groups: Hispanic 23%, White 21%, and Black 14%.
Prioritize YouTube and Facebook, followed by Instagram, TikTok and Reddit (in that order) to connect with low-to-moderate income consumers.
By focusing on financial education and using the right social media channels, loan officers can build meaningful connections with a diverse group of consumers, improve their financial knowledge, and ultimately help more individuals and families see that homeownership is an achievable goal, not just a dream.
Hispanic Homeownership Trends Are Shaping the Future of the U.S. Housing Market
Jeremy Potter, Founder of Next Belt Strategies
National Hispanic Heritage Month kicked off on September 15, coinciding with the National Association of Hispanic Real Estate Professionals (NAHREP) annual event L’Attitude in San Diego. This is a good time to shine a light on topics affecting the Hispanic community because the trends can tell us a lot about the future of the housing market (and the economy as a whole). Here are a few trends that will come to define how we look at housing overall.
Lead Gen and Marketing
The two biggest trends in marketing and lead gen that the Hispanic markets best represent are personalization and diversity of experience. For instance, we know from consumer market research that people like to feel like an experience is built for them or “made” for them. Language options for Spanish are a must-have at this point. The larger theme is we have to be prepared for an increasingly diverse and significant part of the shopping public. Hispanics make up more than 65 million Americans, and that number is projected to grow to over 86 million by 2045. Lead gen will become tied to a referral source, referral network or affinity group (particularly up funnel). Finding ways to curate the experience earlier in a home shopper’s experience should go hand-in-hand with providing a more natural buying process. Working more closely with leads for a longer period of time is going to become the norm.
Mortgage Pros: Technology and tools can help you stay in touch with your customers throughout a longer nurturing and shopping cycle. Tools can help with translation and native understanding of financial terms. Even as CRM and AI-generated marketing tools can help build personal campaigns, it will be critical for our industry to continue to understand our customer’s experiences. Not just putting tools on it but working closely with members of your team and your community to serve new and existing customers.
Entrepreneurs and innovators: One risk of working with customers earlier and longer in the shopping process is the cost associated with time. The goal is to deliver a truly contextual and relevant experience for members of all different communities, leveraging different income types and approving all home styles. That sounds more costly, not less costly. Making the personalized experience less expensive is a worthwhile challenge for startups in our industry.
Manufactured housing / Accessory Dwelling Units (ADUs).
ADUs are a trend that offers more space, more income or both. Existing mortgage products with Fannie & Freddie allow both purchase and refi with ADU financing included. Certainly this is an opportunity to give your current customers some flexibility when shopping for a home and/or retarget your previous customers who might be looking to expand. One example of a successful campaign to bring awareness to these options is the Casita Coalition. Casita Coalition enables Californians to add diverse housing types including ADUs.
Mortgage Pros: As households grow or look for more sources of income, ADUs are a viable option, especially in high cost, Western states like CA, WA, CO, AZ and TX.
Entrepreneurs and innovators: What is the best way to show potential home buyers and homeowners the financial implications of building or adding an ADU? Indeed, it’s a relatively straightforward calculation if the right assumptions are available to enter into a model. What could help, though, is market analysis with different model or manufacturer comparisons.
Household income
Underwriting home loans should be an exercise in providing the best possible picture of your customer’s risk. Today, it is not. There is an incentive to only show enough income to qualify. There are two reasons for this: 1) Additional income means more documentation and verification, potentially introducing delays and complexity. 2) The underwriting guides require that co-borrowers be entirely responsible for the loan amount. For instance, additional household members may want to contribute to the monthly mortgage payment without being on the title or having their credit history tied to the mortgage. Instead of finding ways to accept the additional income and lower risk, the industry tends to operate on a “don’t ask, don’t tell” custom.
In the future, however, households will be increasingly diverse, and I mean that in terms of both types of household formation AND racial and socio-economic composition. We should be incentivizing and streamlining ways to show the most income or support for home buyers and homeowners because that lowers the risk. Lower risk translates into a better investment for loan buyers and a lower price for consumers. Lowering the cost of a home loan continues to be a major priority for politicians and policymakers alike. One way to do this is to remove barriers to collecting and showing the most income without “penalizing” co-applicants or household members for contributing.
Mortgage Pros: Get ready to use data sources like Plaid, Finicity, and FormFree to give underwriters a better picture of your customers.
Entrepreneurs and innovators: How can we capture the data on household income without Fannie and Freddie needing to put those household members on the loan? We should have a loan product that is lower risk and lower price as a result of the safety net represented by family income and contributions.
Nontraditional income
Self-employed income is already a source of focus and innovation, thanks to the higher rates in the last few years. The higher rates forced the mortgage industry to pay attention to every last lead and loan available. Self-employed loan applicants may have been overlooked in previous years as other leads were “easier to come by.” Between necessity and technological innovation, collecting and analyzing data has become better and better. For instance, I know a startup called Greenline that is ingesting bank account data, categorizing income, calculating income and then transferring the data to underwriters (and loan investors) to make self-employed income easier. As we improve the ability to recognize and calculate income from bank accounts, our industry also opens up the opportunity for other sources of income to be easier and more efficient to underwrite. Multiple jobs, temporary or part-time income and 1099 or consulting income (and any combination of income types) need the same smooth, efficient process as w-2 income.
Mortgage Pros: Do not resist the challenge to collect and calculate any and all income types. This is a trend that’s only going to grow – in all communities. Now is the time to learn, get comfortable and stay ahead of the competition.
Entrepreneurs and innovators: What is the best way to gather and proactively maintain income to make it easy to apply for a home loan when the customer is ready? We should have ongoing mortgage applications that stay current with both verified approval and product & pricing as the consumer works with their MLO and shops for a home.
Though greater flexibility of income underwriting, including more housing styles and expanding our definition of lead gen are not exclusively Hispanic topics, these are all the emerging trends that a dynamic evolving customer expects. In doing so, we can serve the next wave of homebuyers, which is good for business, too.
Overcoming Affordability Challenges and Preparing for a Mortgage: A Path to Homeownership for Minority Communities
Heather Kyle, Loan Officer, Waterstone Mortgage
Homeownership is often seen as a key milestone in achieving the American dream, but it remains an elusive goal for many minority communities in the U.S. While the overall homeownership rate has increased over the past decade, significant racial disparities persist. According to the National Association of Realtors (NAR), the homeownership rate in 2022 was 73.3% for white Americans, but only 63.3% for Asians, 51.1% for Hispanics, and a mere 44.1% for Black Americans. These disparities are largely driven by affordability challenges, income gaps, and other systemic barriers. To help minority consumers overcome these hurdles and prepare for a successful mortgage application, there are several key strategies they can employ.
Understanding the Affordability Challenges
Affordability is a major barrier to homeownership, particularly for minority groups. The rising costs of homes, combined with stagnant wages and high interest rates, make it difficult for many to afford a mortgage. For example, Black and Hispanic households often spend a higher percentage of their income on rent, which leaves less money available for saving towards a down payment. This challenge is exacerbated by the income gap between minority and white households. In 2020, the median income for Black earners was $28,000 less than that of white earners, making it even harder to save for homeownership.
Moreover, minority homebuyers face higher mortgage denial rates. NAR data shows that 26% of Black homebuyers were denied mortgages in 2022, compared to 16% of white applicants. Even when approved, minority borrowers often receive less favorable loan terms, including higher interest rates. This further increases the long-term cost of homeownership, making it even more difficult to build wealth through property.
Strategies for Overcoming Affordability Challenges
1. Improve Credit Score: A strong credit score is crucial in securing favorable mortgage terms. Consumers should focus on paying off debts, maintaining low credit card balances, and ensuring all bills are paid on time. A higher credit score can lower interest rates and make monthly mortgage payments more affordable.
2. Increase Savings: Building a robust savings account is essential for covering down payments and other upfront costs. Consumers should aim to save at least 20% of the home’s purchase price to avoid private mortgage insurance (PMI) and reduce monthly payments. Setting up automatic transfers to a savings account and reducing discretionary spending can help accelerate savings.
3. Utilize First-Time Homebuyer Programs: Many states and local governments offer programs that provide down payment assistance, lower interest rates, or tax incentives to first-time homebuyers. Minority buyers should explore these options to reduce their initial costs and improve affordability.
4. Reduce Debt-to-Income Ratio: Lenders assess a borrower’s debt-to-income (DTI) ratio to determine their ability to manage monthly payments. Reducing existing debt by paying down credit card balances or consolidating loans can improve the DTI ratio and increase the likelihood of mortgage approval.
5. Consider Alternative Financing Options: Consumers who struggle to qualify for traditional mortgages might explore alternative financing options, such as FHA loans, which have more lenient credit score and down payment requirements. These loans can be particularly beneficial for first-time homebuyers and those with lower incomes.
Addressing the Racial Homeownership Gap
While individual strategies are essential, addressing the racial homeownership gap also requires systemic changes. Loan officers and financial institutions must play an active role in helping minority communities navigate the complexities of the mortgage process.
1. Education and Outreach: Loan officers should engage in targeted outreach to minority communities, offering educational workshops on financial literacy, credit improvement, and the homebuying process. By providing clear, accessible information, they can help demystify the mortgage process and empower consumers to make informed decisions.
2. Cultural Competency: Building trust with minority consumers requires understanding their unique challenges and cultural contexts. Loan officers should receive training in cultural competency to better serve diverse communities and address their specific needs.
3. Advocacy for Fair Lending Practices: Financial institutions must commit to fair lending practices that ensure all consumers, regardless of race or ethnicity, have equal access to favorable mortgage terms. This includes advocating for stricter enforcement of the Fair Housing Act and supporting policies that reduce the racial wealth gap.
The path to homeownership is fraught with challenges, particularly for minority communities facing affordability issues and systemic barriers. However, by improving credit scores, increasing savings, utilizing available programs, and engaging with culturally competent loan officers, minority consumers can better prepare for mortgage approval. Closing the racial homeownership gap is crucial not only for individual financial security but also for building generational wealth and achieving broader economic equity in the United States.
Building Relationships with Hispanic Homebuyers
Rob Chrane, Found & CEO, Down Payment Resource
September is both National Preparedness Month, intended to raise awareness about the importance of being ready for emergencies, and National Hispanic Heritage Month, September 15 to October 15. Are we alone in seeing this as an opportunity to help more Hispanic families secure their financial future through homeownership?
Hispanic people are a fast-growing homebuyer segment
Statistics suggest Hispanic people are eager to purchase homes. In 2022, the National Association of Hispanic Real Estate Professionals (NAHREP) reports the Hispanic homeownership rate increased to 52.23%, marking eight years of consistent homeownership growth.
Here are a few tips for lenders to successfully engage with this audience and build trust within the Hispanic community.
- Engage with them directly — Attend local events, host bilingual home-buying seminars, and arrange presentations at churches, schools or universities about the mortgage process and the benefits of homeownership, which includes building equity and other financial benefits, including potential tax advantages.
- Partner with local organizations — Show support for Hispanic applicants by attending events and sponsoring scholarships. Be sure to translate your marketing campaigns, listings, and other web-searchable information into Spanish and seek out like minded real estate professionals who can assist your buyers.
- Provide homebuyer support in Spanish — By providing materials and Spanish-speaking loan officers, you can help Hispanic applicants become more comfortable in working with your team to prepare them for a mortgage, so their application is not denied and they are successful homeowners.
- Understand unique household preferences — Some Hispanic families live in multi-generational households so home size and “move-in readiness” are important. Make sure the real estate agents you work with have this in mind in helping families pare down properties to view.
- Match them to down payment assistance — It’s often hard to save a down payment and that’s why there are more than 2,400 DPA programs across the United States, many targeting low- to moderate income buyers. These programs can be used for a variety of costs and property types, including manufactured housing, which offers an affordable price entry point for many buyers. You can operationalize this resource through Down Payment Resource.
For more on DPA, watch my recent interview with Brian Vieaux, president and COO at FinLocker, here.