Even as home prices rise, the American dream of owning a home is still alive.
However, this can be a high hurdle for first-time home buyers.
New data from the National Association of Realtors shows that previously owned home sales rose 7% in September as mortgage rates fell. However, first-time home buyers only accounted for 28% of these transactions, the lowest since July 2015.
Bank of America, along with other financial institutions, is working to help more people become first-time homeowners through an initiative targeting low- and middle-income communities.
The company started the project, called the Bank of America Community Homeownership Commitment, in 2019. That year, it increased its commitment to $ 15 billion by 2025, with the goal of helping more than 60,000 individuals and families buy homes .
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Other banks have launched similar funding programs to help residents of underserved communities buy homes.
Wells Fargo offers five-year forgivable down payment loans through its NeighborhoodLIFT program to home buyers living in designated areas and below certain income levels. JP Morgan Chase this year expanded its $ 5,000 grant program to cover down payments and closure costs in minority neighborhoods across the country. PNC also offers Closing Cost Assistance Grants, which give eligible home buyers loans of up to $ 5,000.
The effort comes because campaigns to end racial discrimination received national attention after the death of George Floyd. Mortgage lenders have historically been involved in reinforcing racial segregation by participating in official government policy called redlining, which made it difficult for non-white residents to buy houses. But even after redlining was no longer an official policy, non-white mortgage applicants often faced higher interest rates and neighborhood segregation.
To date, Bank of America has helped 29,000 homeowners buy homes and made $ 270 million in grants. About 85% of these people are first-time home buyers.
The program has two options. The Down Payment Grant Program gives eligible buyers 3% of the purchase price of a home up to $ 10,000, whichever is lower, for a no-refund deposit. These funds are available in more than 260 cities and counties.
In addition, America’s Home Grant Program offers up to $ 7,500 in credit for one-time acquisition costs. This can be title insurance, enrollment fees, or a permanent reduction in mortgage rates. This grant also does not require repayment and is available in 800 cities and counties.
Because the two grants can be combined, eligible homebuyers can receive up to $ 17,500 in grants towards their purchases.
The program coincides with Bank of America’s efforts to advance racial equality, including a focus on closing the racial wealth gap between black and Hispanic-Latin communities for affordable housing, as well as other areas such as jobs, small businesses, and health care.
Despite a competitive real estate market, data released this week by Bank of America showed that first-time home buyers are not discouraged.
Of the 2,000 adults surveyed who currently own their own home or who plan to do so in the future, 69 percent said that the importance of owning a home had increased in the past year.
61% of first-generation homeowners said the importance of building capital has increased compared to 39% of non-first-generation homeowners.
The market is highly competitive so you’ll definitely want to make sure you’re pre-approved.
Neighborhood and Community Loan Director at Bank of America
That’s because single-family home rents rose 9.3% nationwide in August, according to CoreLogic.
Buying a home can help stabilize monthly mortgage payments, said AJ Barkley, director of neighborhood and community loans at Bank of America.
The pandemic has also inspired potential first-time buyers to seek more outdoor space, financial security and opportunities to make their families proud, she said.
The real estate market will eventually cool down and stabilize, said Barkley.
Still, today’s market shouldn’t deter people looking to buy their first home from preparing for that destination now, she said.
“Be ready when you are,” said Barkley. “And when the programs and the houses are available, then you are available.”
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For potential first-time home buyers who are in a good financial position thanks to consistent savings and smart credit management, the purchase can still offer benefits in the short term, she said.
For those looking to keep shopping, now might be a good time to evaluate their finances and budgets and understand where their money is going.
It also helps to do your research as part of that preparation. There are thousands of scholarship programs across the country, in addition to those sponsored by financial institutions, Barkley said.
Additionally, by working with a financial institution to get pre-approval for a mortgage, which typically lasts around 30 to 45 days, prospective buyers can be ready by the time they find the home they want.
“The market is competitive, so be sure to make sure you have pre-approved as it could take longer with competing offers, which we see a lot,” said Barkley.