Over the last decade, homeownership among Hispanic Americans has continued to hover below the national average of 62.5 percent, as reported by the U.S. Census Bureau in April 2016. First-time Hispanic home buyers may have shied away from entering the housing market due to stagnant wages and debt, but times have changed.
According to TD Bank's Mortgage Service Index, Hispanic Americans feel optimistic about the housing market, with two out of five reporting that it's a good time to buy a home.
If you're purchasing a home, it's important to be prepared for the financial journey that lies ahead. Often times, first-time home buyers jump into the housing market. If done wrong, a homeowner can find themselves with financial regrets and issues. Here are three common pitfalls made by first-time buyers - and how to avoid them.
1. Lack of knowledge about the financing process. TD's survey found that two-thirds of recent Hispanic homeowners were first-time buyers. First-time buyers need to have a good understanding of the financing process. One way for buyers to become educated on the financing process is to take advantage of free educational courses offered by local financial institutions, as well as certain government programs.
For example, TD Bank offers first-time home buyer seminars that explain the pros and cons of renting vs. owning, outline the true costs of obtaining a mortgage, provide an overview of the loan application process and share information on the criteria lenders use when evaluating borrowers.
If you're daunted or overwhelmed by the process, be sure to speak with a trusted financial advisor as well. Your lender should be a valuable resource throughout the home buying process.
2. Not saving enough cash for unexpected costs. A mortgage is only one part of the cost of homeownership. Saving for a down payment and closing costs is not enough.
First-time buyers should be prepared to have a cushion for unexpected repairs and other expenses that come up. Over half of Hispanic Americans surveyed in our study incurred more than $2,000 in unexpected expenses during the mortgage process. These costs may include a home inspection and appraisal, lender and attorney fees, escrow fees and closing costs. Factor in these costs when you're establishing a budget. Also, keep in mind that your utility bills and maintenance costs may increase if you're buying a larger home.
3. Not shopping around for a mortgage. Finding a lender and discussing financial needs and budget should be the very first step a buyer takes in the home buying process - even before finding a realtor.
TD Bank's Mortgage Service Index revealed that a quarter of potential Hispanic American homebuyers expressed a strong desire for education and guidance when identifying a home loan. By working with a lender even before you begin your home search, you can get a much better idea of the best loan options that fit your unique financial situation.
There's no such thing as a one-size-fits-all mortgage. When preparing to buy your dream home, make sure you are consulting with a lender early. It's important to find a lender with a trusted advisor, a professionally trained Mortgage Loan Officer (MLO) that will provide ongoing and timely communication throughout the process. An MLO should also be an educational resource and ensure the home-buying process is simple and straightforward.