Most First-Time Buyers Will Be Latino, But The Credit System Creates Barriers
Carmen Gamez is about to complete the purchase of her first house. Latinos Are a Growing Force in Homebuying. For him, the two-bedroom-per-unit duplex in Rock Falls, Illinois, is the epitome of financial freedom.
At 78 years old, She is excited to achieve this lifelong, ambitious goal.
Gamez is one of several Latinos who are making up a larger and larger portion of first-time home buyers. She may be older than average for a first-time Latino home buyer, but the conditions that led up to this point are not.
She’s always wanted her own place, but in recent years she’s struggled to save for a down payment or keep her credit score in good standing. She worked with a support program to help cover the upfront costs of buying a home for a long time.
“It all makes it worth it because my tenant will cover my mortgage,” said Gamez, a retired preschool teacher. “I can use my retirement income to travel and really enjoy myself.”
- Latinos are set to make up 70% of those buying their own home for the first time in the next 20 years.
- Latino first-time buyers face many more difficult challenges than other groups, including a lack of affordable housing, low incomes, and low credit scores.
- First-time Latino homebuyers can find resources to help them improve their credit scores, pay for the down payment, and understand the mortgage application process.
Mauricio “Mo” Perez, treasurer of the National Association of Hispanic Real Estate Professionals (NAHREP) and head broker for Keller Williams Realty in Chula Vista, Calif., “So for Latinos, the goal of owning a home (in my opinion) may be a higher priority than for other demographics.”
Therefore, regardless of the fact that they may find it challenging to get a mortgage due to language, financial, and cultural barriers, Latinos continue to represent one of the populations of first-time buyers with the fastest rate of growth. And there are plenty of ways to assist Latinos in the process. Organizations have been established.
“The Future of Home Ownership Is Hispanic”
Hispanics buying a home have increased significantly in recent years, especially among those under 65, and are expected to keep growing over the next 20 years, according to a report by the Urban Institute for Upward Mobility and Social Equity. A Think Tank focused on
Note: Both Hispanic and Latino are words that describe ethnic identity and include many other races, cultures, and people. In this article, the terms are used interchangeably depending on an individual’s preferences or in the context of the data source. Both words are used to describe the background of people based on their heritage—Hispanic refers to someone who has roots in a Spanish-speaking country, while Latino is used to describe people with backgrounds from a country in Latin America. can be used to describe
Although not unbelievably fast, the change, which really is partly due to population growth, has been significant: in 1990, only 7.3% of households under the age of 65 were Hispanic. By 2040, that number is likely to exceed 20%.
Hispanic Homeowners Gaining Ground
One out of every five households will be Hispanic by 2040. According to one estimate,
Indeed, between 2020 and 2040, more than 70% of new homeowners will be Hispanic, with researchers predicting a trend that has prompted mortgage giant Freddie Mac to declare that “home ownership’s future is Hispanic.”
Reason for some change to come: The Hispanic population is young and growing much faster than other demographic groups.
According to Jun Zhu, a researcher at the Housing Finance Policy Center of the Urban Institute, “the majority of them are actually entering their prime homebuying years, so they’re becoming homeowners.”
Not only is the Hispanic population growing, but the likelihood of Hispanics becoming homeowners is increasing. According to a NAHREP analysis of Census data, the rate of Hispanic home ownership has been steadily rising and is on track to surpass 50% by 2025. However, this rate is still lower than that of their counterparts who are White and Asian.
Hispanic Home Ownership On the Rise
The rate of homeownership among Hispanics continues to rise and is projected to reach 50% by 2025. (To see a specific data point, tap or hover over that area of the chart.)
Chart: Fox Us Usa / Source: National Association of Hispanic Real Estate Professionals
“Homeownership not only signifies stability and financial security for Latino families but also a higher standard of living. It stands for a constant gathering spot and, ultimately, a feeling of identity within your neighborhood and city. embodies the spirit, “said Erica Mankins, manager of Unidos, a non-profit group that fights for Latinos’ civil rights. Unidos is a non-profit organization that promotes financial empowerment.
Case in point: Mancinas’ parents immigrated to the United States in the 1980s and, through some assistance programs, bought a starter house in the 1990s. They still live in that “starter house,” where they educated their kids, according to Mankins.
She said, “My parents have almost always commented that the security this home gave them and gave us as a family actually allowed them to start saving for our college education.
There really are major differences between Hispanic buyers and other demographic groups. For example, they also tend to have higher average family sizes and more multigenerational households. As of the 2021 Census, there were 3.19 individuals per average Hispanic household, vs 2.4 for non-Hispanics. Humans lived.
Zhu said they are more likely to be self-employed with multiple sources of income, which are often overlooked by mortgage lenders.
What Stands in the Way
Often, Latino homebuyers can be left behind by a mortgage system that values traditional employment and credit scores. Lack of citizenship and Spanish language resources may also further impact their home buying prospects. They often live in areas where some new homes are being built and may need more space if they are living in an inter-generational home.
For example, Anakaran Ramirez, a native of Chicago, had no idea that she would be able to own a Do-It-Yourself home. She was living with her mother, two daughters, and brother in a basement apartment and working as an administrative assistant at Midway Airport. She needed more space for his family, but owning a home seemed out of the reach.
Ramirez was a participant in the Deferred Action for Childhood Arrivals program, which enables children of undocumented immigrants to live and work in the United States legally, but she believed that her citizenship status would prohibit her from getting a mortgage. She said that the idea of saving for a down payment on a house seemed to be as difficult.
Many homebuyers find it particularly challenging to save for a down payment, but for Latinos, the salary difference makes the situation that much worse. The median household income for Hispanics was $55,321, up from $67,521 for all ethnic groups in the 2020 census. According to the NAHEP, this leaves the average Hispanic family with less than the $68,000 yearly income required to finance the median-priced American home.
A number of first-time purchasers have been driven off the market as a result of the recent pandemic-related quick surge in real estate prices and rising mortgage rates. Additionally, the chronically limited supply of affordable homes for sale has had an especially negative impact on Hispanic communities.
Hispanic buyers may also have poor credit, frequently as a result of paying cash for purchases, says Freddie Mac.
Hispanic homebuyers may be turned off by managing cultural and language barriers, according to Freddie Mac analysts. The Latino community may find it challenging to start looking at homes or learn more about the home buying process because of a lack of bilingual resources.
Note: Looking for Spanish-language materials about buying a home? For help, go through our collection of Spanish language resources.
According to research by the Pew Charitable Trusts, Hispanic buyers are more likely than any other group to choose riskier, non-mortgage sources of financing for property purchases because of these barriers to getting a mortgage. This included seller-financed mortgages, lease-purchase agreements, and other loans that have all the protections of a mortgage.
Since the lender doesn’t have to go through the mortgage foreclosure proceedings, which contain safeguards for homeowners, when you default on these loans, it is considerably simpler to lose your home. Additionally, non-mortgage loans also known as alternative house loans don’t always result in the borrower having full ownership of the property.
Hispanic Buyers Most Likely to Use Nonstandard Financing
A 2021 survey found that Hispanic buyers were more likely than other racial groups to use alternative financing to buy their homes.
To help Hispanic first-time homebuyers get mortgages and become homeowners, there are options available.
Where to Get Help
Ramirez, who is currently an executive assistant in the Illinois governor’s office, made her first home purchase last year. She stressed the importance of working with a real estate agent who explained the procedure and helped her in applying for a Federal Housing Administration loan, a type of federally backed loan with down payments as low as 3.5% as compared to the customary 20% down payment for a conventional loan. Ramirez was able to purchase the home for $12,000 down.
According to Perez, NAHREP can help Hispanic buyers in locating a real estate agent who can help them through the home-buying process, including working to improve their credit scores as needed.
When you have an experienced professional on your side, many of these challenges can really be easily solved, Perez said. “Having bad credit is a problem we see frequently, but there are easy solutions to improve one’s credit in a matter of weeks.”
Gamez was able to secure further assistance. She bought her house with the help of the Neighborhood Assistance Corporation of America, a nonprofit organization that supports home ownership, and she only had to pay an inspection fee out of her own pocket.
Throughout its Wealth and Housing Partnership program, which includes counseling and instruction in both English and Spanish, UnidosUS also provides aid.
To help first-time buyers overcome the challenge of making a large lump sum payment at closing, there are many government and nonprofit downpayment assistance programs.
For home buyers like Ramirez, the rewards of buying a home have outweighed the costs.
I feel fantastic, she said. “I feel successful. I am satisfied. It feels fantastic to be able to say, “I’m headed home,” because I feel like we’ve made this house into a home.
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