Sustainable Home-ownership. Why it Matters.
Most of us remember the uncertainty that the recession in 2008 caused. In 2010 the government stepped in with the Dodd-Frank law in order to help prevent another financial and mortgage meltdown. Recently, there have been some rollbacks to this law. In particular, home buyers with larger amounts of debt — above the standard 43 percent DTI (debt to income ratio) who normally wouldn’t meet borrower requirements — could now be approved. And, due to the relaxation of some regulations we could see smaller banks and credit unions start originating home loans again. Is this good for prospective home buyers?
Most people would agree that owning their own home is part of the American Dream but the purchase can be difficult. Unless you have a family member or friend that works in the mortgage industry, the majority of individuals do not have more than basic knowledge. This lack of knowledge about what it takes to buy and keep a home can be the difference between being able to handle an emergency and keep your home or face foreclosure. First time home buyer classes offer a wealth of knowledge about the mortgage process. If it is a HUD approved class, then you will spend 8 hours learning about things like debt, how much house you can afford, and how to create a budget. While most people have an understanding of each of these they lack the in depth knowledge it takes to become a sustainable homeowner. A sustainable homeowner is a homeowner that
- Is prepared for the long-term responsibilities of home-ownership
- Realizes the importance of budgeting and saving
- Knows what steps to take during a financial hardship
- Is involved in their community
There are also several benefits to sustainable home-ownership. First, it can lead to an accumulation of wealth. According to the Federal Reserve’s Survey of Consumer Finances in 2013, a typical homeowner’s net worth increased by a multiple of 45 on a lifetime financial achievement scale. Also, your home will appreciate in value creating valuable equity for you and generations to come.
Second, responsible home-ownership affects communities in a variety of ways. There is pride in owning a home, in a 2018 survey conducted by the National Association of Realtors, 93% of those polled thought that home-ownership was something to be proud of while 80% thought is was a part of their American Dream . Research on the subject has found that, other things being equal, children of homeowners do better in school (higher test scores and lower anti-social behaviors). Lower crime and lower drug usage were among the findings for the children of homeowners. Homeowners are more likely to be involved in volunteer work, local elections, and civic clubs compared to those who rent. A community with homeowners who are more civically engaged helps its residents thrive. Communities also thrive when it has homeowners that are able to afford their homes and stay in them long term.
In summary, while it may be beneficial to get a home loan through a small community bank or local credit union, careful review of DTI will help avoid another mortgage crisis. It's exciting to go shopping for a home but more exciting to build wealth from that home. That wealth can be passed down for generations. Avenue's First Time Homebuyer classes can help you learn about the wealth building benefits of home -ownership. If you would like to learn more about what it takes to become a sustainable homeowner visit our website and sign up for a class. Avenue’s housing counselors can help you create a road-map to sustainable and responsible home-ownership.