Black History Month is here! At Chartway, we believe in the power of diversity in thought and culture and celebrate our differences out loud. February is dedicated to recognizing many African Americans’ achievements and contributions to our collective history. This month, we intentionally celebrate African Americans and the Arts; and, as we celebrate, we want to financially empower our Black community.

As you discover meaningful ways to recognize Black History Month, stop to plan how much money you’ll spend for celebratory purposes – budget your expenses instead of spending frivolously. Everyone has a different perception of money: some people link money to status, some view it as disposable, and others see it as a lifeline or a means to an end. We’re here to help you shift your perspective, so you can live a financially empowered life.

Generational wealth has become an increasingly important topic in the Black community, sparking questions about its significance and how to achieve it in today's economic environment. The answer is simple: the key to generational wealth is homeownership. In a report released last year by the National Association of Realtors, 44% of Black Americans own a home compared to 65.5% of White Americans. Further, the association found the gap between Black homeownership rates and that of any other race or ethnic group is even larger now than it was in 2011.

Depending on your current financial situation, homeownership isn’t always possible and paying rent maybe the best option as you plan for your future. However, building generational wealth through ownership isn’t impossible – there are several factors to consider as you prepare to pursue your home in the future:

  • Understand what costs are part of the total cost of ownership.

  • Strategies to minimize the total cost of ownership

  • How minimizing the total cost of ownership can change your financial future.

When considering how much to spend on a new home, most people only consider the total price or monthly payment. Homeownership includes many other costs that can add up in ways you may not expect. The total of all these expenses is known as the total cost of ownership. Here are a few of those costs to consider when thinking about a new home:

  • Total cost and value of the home

  • Appraisal fees

  • Closing costs

  • Downpayment

  • Interest

  • Mortgage payments

  • Water

  • Electricity

  • Repairs/Renovations (inside and out)

  • Emergency repairs

  • Homeowners insurance (and sometimes additional flood insurance)

  • Property taxes

How to Shrink the Gap

There is a gap that puts members of the Black community at a disadvantage where homeownership is concerned; and at Chartway, we aren’t blind to it. We believe everyone who wants a home should have an equal opportunity to purchase one. Let’s quickly cover a few crucial steps you can take to help shrink the gap by purchasing your own home:

  • Protect your credit – your overall credit score is important and so are the factors that impact your credit. Too many inquiries can heavily impact your credit and the number of open accounts you have can affect your credit as well.

  • Manage your debt - your debt-to-income ratio can determine if you’ll be approved or denied for a home buyers’ loan. A mortgage loan officer will deny you if they believe you can’t make consistent on-time payments because the debt you owe exceeds your monthly income.

  • Make your payments on time – if you fall behind on payments for accounts listed on your credit report, it will affect your overall credit and lenders’ view of the risk associated with providing financing for your home. If you make your payments early AND pay more than the requested amount, it shows a pattern of financial responsibility. It will also help you pay off your loan(s) faster, significantly benefiting your credit health.

  • Stay away from predatory lenders – owning a home is important and no small feat! The home buying process can be lengthy, filled with legal advice and several necessary steps – but it’s worth the wait. Mortgage lenders may deny you, but don’t accept defeat! Keep trying until you find an MLO (mortgage loan officer) willing to work with you. When home buyers hear ‘no’ often, they can get discouraged; and that’s when predatory lenders creep in with a quick deal and crooked contract that will leave you with sky-high interest.

  • Rent is expensive – in the current economic climate, property managers are more apt to increase rental rates and many of them already have. Rent if you must, but renting isn’t an investment. If you rent an apartment and are spending a lot of money on utilities, keep a record of your expenses and add them together. If the total is high and you are financially ready for more responsibility, you may want to consider putting those rent payments toward a mortgage instead.

The QOTD (Question of the Day)

Here’s the big question: how bad do you want it? Generational wealth is vital to the Black community; and if homeownership is the key, what sacrifices are you willing to make to get there? Your relationship with and perspective on money greatly determines your commitment to building generational wealth. You’ll need discipline if you want to help your family get ahead. Whether you’re a serial spender with big dreams or a frugal one with limited income, we have some tips below to help you adjust your perspective on your earnings:

  • If you have difficulty putting good intentions into practice, consider breaking down your goals into smaller pieces. Give yourself a few things that can be accomplished quickly and easily. Poor financial decision-making is habitual, and you can break that habit by creating a new one.

  • Set realistic goals. Aim for too much too soon and you’ll likely get discouraged. It’s also important to think about what you want. Money is just a means to an end. How can it help you achieve satisfaction and happiness?

  • Keep a meticulous budget and write your goals down on paper. Make these things tangible. Your brain will focus on ideas that you express on paper.

  • Think about your future self in an empathetic fashion. It may sound rather abstract, but studies have shown that people who have done this are more likely to make sound long-term financial decisions.

The Takeaway

These steps can’t guarantee you a home; but if you follow them and do your research, you’ll be much closer to creating generational wealth through home ownership. We’ll go into depth regarding homeownership and provide practical steps you can follow for buying your first home later this year in a different blog; but essentially, what stands between you and the goal of creating generational wealth via homeownership is discipline. Homeownership is a personal investment, and spending now versus saving for the future is a personal choice. However, understanding the actual cost of ownership is your first step toward making an informed decision.

When it comes to reaching financial goals, we’re often our own worst enemy. By recognizing this fact, we can take steps to “outsmart our programming” and let sound financial decision-making come out on top.

Chartway’s mission is to build a safe, inclusive, and supportive environment for all. As we celebrate Black History Month, we encourage you to stop by one of our branches and connect with one of our Mortgage Loan Officers to learn more about your options for building wealth for your future and future generations to come. People helping people is a unique way we take a step toward a more inclusive and equitable future, deeply embedded in the values that drive Chartway.