But for many homebuyers, financial decisions from years ago add one more barrier during that process: debt.
Too much debt can prevent a prospective homebuyer from getting a mortgage. And in America, that problem doesn't affect everyone equally.
Black homebuyers are more likely to be denied mortgages than white buyers are, a LendingTree analysis found. Among the factors: Nationwide, Black and Hispanic families have more debt relative to their income and assets than white families do, according to the Employee Benefit Research Institute.
"Debt-to-income ratio is one of the key reasons Black households are denied [mortgages]," said Jung Hyun Choi, a senior research associate at the Urban Institute who has studied the homeownership gap.
In the Seattle area, a novel program aims to begin addressing that problem.
Habitat for Humanity Seattle-King & Kittitas Counties is launching a new effort to pay off up to $50,000 in debt for qualifying homebuyers who plan to buy a Habitat home. The assistance is meant to help people clear or reduce old debts that may be blocking their ability to get a mortgage, even if they have found help for other steps of the process.
"You can have all the down-payment assistance in the world, but if you can't qualify because your debt is so high ... you're just not going to be able to buy a home," said Ali Sheibani, Habitat's director of homeowner services.
The new program will be limited in scope, open only to buyers who qualify for and buy homes through Habitat. The organization serves people who make less than 80 percent of area median income, or $85,800 for a family of three in King County. Buyers may be carrying debts ranging from student loans to medical bills, back child support or the fallout from identity theft, Sheibani said. The program is aimed at helping Black buyers, though anyone who qualifies can access it.
With $250,000 to fund its initial pilot program, Habitat expects five to 10 families to receive debt remediation this year. While some loan programs help tenants pay back debt, Sheibani said he believes the new assistance is the first of its kind.
The new program is narrow in reach, but it illustrates the types of support advocates say is necessary to finally begin to close the worsening gap between white and Black homeownership rates. In Washington, about 68 percent of white households own their homes, compared with 31 percent of Black households, according to 2019 census data. Researchers point to past and present discrimination and economic inequality as a cause.
Washington nonprofits and industry groups have called on the state to increase funding for affordable housing, down-payment assistance and credit repair.
Families can cut costs to avoid debt — buy a cheaper car or go to a more affordable college — but that only goes so far. "If they don't have a high income, that means those families will take on greater debt," Choi said.
To choose recipients for the new program, Habitat will consider an applicant's source of debt. Habitat will pay off up to $50,000 of debt after the buyer has finished half of their "sweat equity," in which buyers perform construction or other work for Habitat, and begun working with a counselor on budgeting, Sheibani said.
Homesight, a nonprofit lender and developer, will help refer homebuyers to the program. Until now, the organization had few options to offer buyers whose debt was a barrier, said Executive Director Darryl Smith.
Choi said helping people pay off debts is "the right path to reduce the gap" between white and Black homeownership rates.
But if nonprofits or governments create similar programs to help buyers shopping on the private market, rather than through Habitat, they could face new challenges. Higher interest rates are driving up monthly mortgage payments, meaning a break on debt may not be enough to help buyers with lower incomes afford the cost of buying a house, Choi said.
For Sheibani, the biggest question ahead is whether his organization can meet the need in a region where affordable homes are scarce. "Are we going to have enough funds and enough homes?"
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