How to prevent foreclosure
Purchasing a home can be an exciting process. While you’re visiting properties, weighing pros and cons and evaluating neighborhoods, you’ll need to take a step back and carefully consider what home makes the most sense for you financially. Foreclosure is emotionally and financially devastating, but for the most part, it can be prevented with forethought and planning.
So, what is foreclosure? Simply put, foreclosure is a financial process where the lender reclaims a home from the borrower because of an inability to make payments. The immediate implication is the loss of your home and property, but the ripple effects – like a hit to your credit score, inability to purchase a home for five to seven years, and emotional distress – can be felt for years.
United Housing is committed to helping Memphians achieve homeownership. But beyond that, we want to help our neighbors remain in their homes and build wealth. Here’s what you can do before you buy to help prevent foreclosure.
Attend a Homebuyer Education course
Fully understanding the cost of owning a home can help you better determine how much money you can afford to spend on a home, consequently preventing you from overextending yourself financially. Homebuyer Education courses, provided by organizations like United Housing, paint a holistic picture of the homebuying process and the costs associated with buying and maintaining a home. If you’ve already purchased a home, it’s not too late! We can still help you through our Post-Purchase Homeowner Education classes.
Create a budget and stick to it
Once you know how much homeownership costs, you can build a budget to ensure you have the money needed to cover your mortgage payment. United Housing’s HBE course helps you start the process, providing you with the tools you need to lay out your expenses and set your spending priorities.
Prioritize saving
Simply put – life happens. Even sound budgets can be shattered when economies change, babies are born or jobs are lost. Having a solid savings account will leave you time to reallocate your funds without missing payments on your mortgage.
What to do if you’re facing foreclosure?
If your mortgage payments are mounting, seeking help early can keep you in your home. UHI offers foreclosure counseling where our team of caring, trained professionals can help you evaluate your options. You don’t have to lose your home, and we can help you find a solution.
Creating a home for the holidays
A key conversation that often gets lost in the topic of homeownership is the importance of rental homes. Although it seems counterintuitive to the goal of homeownership, renting a home is an important step while you save for a down payment or shop around. Another reason that having access to rental homes is important is because homeownership, although valuable, is not always the best option for every person.
Placing value on rentals
For some people, renting a safe, well-maintained home is more worthwhile and accessible. Rental homes can come with special features, such as included lawn care, planned essential maintenance and even access to amenities. Rental units, especially those that are part of an apartment or condominium community, also often have more safety features and accessibility options, since they must adhere to a separate code. Renting a property also makes it easier to live in places that are close to work or appointments, and residents can more easily move if their needs change.
Most importantly, rentals are a more affordable option for some people. There’s no need to have a down payment, pay real estate taxes or worry about fluctuating property values since they aren’t a permanent stakeholder in the property. There’s also less liability for unexpected costs, like repairs or replacements, which can range from hundreds to thousands of dollars.
Making space for rentals
The benefits of rental homes are especially evident for people on fixed incomes, like seniors and people receiving disability payments. The consistency and flexibility fits their needs better than homeownership, which is why many long-term renters identify within these groups.
However, long-term renters often struggle to find affordable, yet safe and well-maintained homes. They are also at risk of being taken advantage of by landlords as they may not have the resources to leave or resolve the issue fairly. This forces them to choose to live either in unfit homes or lose valuable autonomy by living with family members. United Housing recognizes this inequality, and is working against it with our Home for the Holidays campaign, which helps maintain the 45 properties we rent to seniors and individuals with disabilities.
More specifically, the goal of Home for the Holidays is not to simply repair rental homes, but to provide dignified and fair housing to long-term renters. The funds raised during the campaign help to ensure that these 45 rental homes always have safe, clean and functioning features for their residents, without transferring the cost of upkeep to rent increases and other fees. This not only creates reliable housing for vulnerable groups, but also helps to make housing more accessible and equitable in Memphis. Learn how you can assist in the effort here.
Budgeting for the holidays.
The holidays may be the most magical time of the year, but they can come with a lot of expenses On top of the cost of parties, decorations, feasts and fun outings, there’s also pressure to snag the perfect gift for all your loved ones and more. Buying gifts for everyone on our list can quickly become expensive and cut into regular, essential budgets.
To help shoulder this financial burden, you might be tempted to put off your essential bills to create a budget for the holidays. But this can cause even more financial stress later on. Below, we outline a few things to keep in mind when shopping for your holiday gifts.
Picking the right way to pay it off.
Predatory lenders earned their name for good reason – they dangle benefits without telling consumers the potential consequences of their services. Predatory lenders come in many different shapes and sizes, but two of the most commonly used during holiday shopping are payday and buy-now-pay-later lenders.
Both options sound great at first, but lenders don’t clearly outline the exorbitant interest rate, unexpected fees and other fine print that can ruin your credit score. Buy-now-pay-later lenders, usually in the form of popular apps, are especially dangerous thanks to trendy and clever marketing. Consumers can quickly rack up debt and have difficulty paying the loans off if the service is used irresponsibly.
Instead, many stores offer layaway programs that allow customers to pay off the item interest-free over several months and pick up the item when payments are complete. This is a safer alternative to short-term loans and can help families make large purchases without sacrificing essential expenses or using debtors with high interest rates.
Protecting your assets.
Some loans don’t appear to be loans at all – making them all the more predatory. These often come in the form of second mortgages or car title loans, which put the most valuable and essential assets at risk. When you take out a second mortgage or sell your car title for extra cash, you use your home or vehicle as collateral. This means if the loan is not paid off, lenders can take possession of your home or your car. Car title loans are especially risky because they usually don’t come from a reputable lender and typically have such high interest rates that paying them off is nearly impossible. Unless you’ve received advice from an accredited financial expert, you should never use your home or vehicle as collateral for extra cash.
Finding the real meaning of Christmas.
While layaway is a relatively safe way to spread big purchases out, it's not the only way to avoid debt around the holiday season. As the clichéd saying goes, the true meaning of the holidays is about more than the latest toys. There are plenty of ways to give beautiful, meaningful gifts and stay within your budget.
Many toys, electronics and even clothes can be purchased secondhand from reputable sellers at a lower cost. Planning ahead and shopping sales throughout the year can also help you stay within budget and avoid last-minute overspending. Gifting something meaningful can also help prevent overspending. Try making a casting of a pet’s paw, framing a special photo or finding something in a thrift store that reminds you of a favorite memory. After all, showing others that you care is what gifting is all about.
Budgeting for the holidays can feel overwhelming, but planning ahead and educating yourself on safe purchasing habits can save you money. For more information on predatory lenders in general, check out our May blog or attend one of our homebuyer education courses.
Local landlords – why we need them
Renting is a crucial part of the homebuying process. Future homeowners need an affordable housing option while they find their future home or save money for a down payment. Rental properties fill these needs. Because rental properties are essential, it’s important to develop and preserve a healthy market share of affordable rental units. One way that we can drive fair, decent renting is by encouraging local residents to invest in rental properties and become landlords. Below, we outline a few of the benefits of sustaining rental property management within the local economy.
Preserve community integrity
Historical homes and buildings make a city more interesting to visit and live in. They tell a story of the city, and more importantly, the neighborhood they’re located in. Preserving the culture and history of cities and neighborhoods is important to maintaining value and avoiding becoming a non-place.
Non-places refers to areas where authenticity is replaced with anonymity. When foreign investors develop in a city, they tend to purchase large swaths of property. In these purchases, they are more inclined to tear down historic or culturally significant properties to build generic residential areas. This not only interrupts the historical aesthetic of a city, but removes the valuable and unique culture built over time. However, for local investors purchasing individual properties, the cost of renovating a singular existing building is more feasible. Their deeper understanding and appreciation for a neighborhood's original architecture often means that these renovations will align with community standards and renter preferences.
Improve tenant experience
The key part of having a local landlord is just that, locality. Rather than investing in a development then moving on to the next city, locally based landlords remain in the area which makes them more available to address problems. With local landlords, tenets are able to contact them directly, rather than going through multiple channels or large management companies. Direct contact, proximity to the property and contacts with local trade professionals help ensure serious issues are resolved quickly and rental properties stay in good condition. On top of this, local property owners tend to manage fewer properties which means they give more attention to issues when they arise, making it an all-around better experience for the tenant.
Remain invested.
When you shop locally, you’re keeping money within the community – living at a locally owned property is no different. Rent paid to a local landlord stays within the city’s economy through taxes, purchases or additional investments. This is beneficial to the community's economy in several ways.
First, locally based landlords pay taxes on their personal property and income, in addition to their rentals, which circulates directly back into improving the community. Additionally, local landlords make purchases within the community, which support businesses within the city. Finally, locally based landlords reinvest in more properties, which helps discourage out-of-state, large investors and sustain an independent local economy.
Affordable Housing: A Way for Women to Gain Financial Freedom
Politics, religion and money – three things we are told to avoid in conversation with others. While the rules surrounding the first two have begun to relax, discussing money is still considered taboo. And, this sense of taboo only increases when discussing women’s financial health.
Especially for women, understanding your finances – where your money goes and how to get the most out of it – is essential. Women are more likely to experience gender-based pay discrimination, lower wages and societal pressures that affects their earnings. Women are also more likely to have lower levels of financial knowledge, which can negatively affect their ability to achieve financial freedom and success. United Housing is committed to identifying these unique challenges and helping women overcome them, starting with affordable housing.
Housing is a basic human need, and therefore a vital part of any budget. As an essential expense, housing has the power to significantly impact one’s financial freedom and quality of life. Unfortunately in most cities, housing options within people’s budgets are often unavailable. In fact, 7.2 million more affordable housing units are needed in the U.S. to meet the needs of low-income families. This lack of affordable housing causes people to stay in living arrangements that don’t work for their family, or to overextend themselves and their budgets to pay for a place to live that does meet their needs. Studies show that there is no state or county where a renter working full-time at minimum wage can afford a two-bedroom apartment.
In addition to an overall lack of affordable housing units in the U.S., women often face unique circumstances that make the search even more difficult. In comparison to men, women are more likely to live as single parents, making it challenging to find housing that is large enough to accommodate children while still staying within budget. This also renders many single moms unable to live safely and comfortably in traditionally affordable spaces, like studio apartments. Along with being more likely to have children, women are also more likely to be victims of assault. That means they must take area safety into consideration when looking for housing. Meaning, housing within their budget may be available, but they are less likely to purchase or rent if it offers inadequate protection or is located in an unsafe area.
United Housing is here to help women, and all Memphians, overcome housing inequality and reach financial independence. Through our Homebuyer Education Courses and housing counseling, we work to provide our clients with the necessary tools and knowledge to gain or maintain financial wellness. If you want to work toward financial wellness or learn more about our work toward affordable housing for all Memphians, give us a call at 901-272-1122 today.
Mortgage assistance to get back on track
Most people hear “mortgage assistance” and think of individuals trying to keep their homes. However, many individuals still need help after falling behind on mortgage payments, regardless of proximity to foreclosure. Although they may not be in jeopardy of losing their home just yet, the inability to stay up on mortgage payments makes it impossible to move and can render them unable to reach life milestones, make exciting new changes or invest in their futures.
Relocation
If someone is looking to relocate, they won’t be able to sell their home without covering the losses. That can make buying their next home more challenging. Relocation isn’t just something people do frivolously or when they’re looking for a change. It can be a major factor in the trajectory of a person’s life. For example, you might want to take a job opportunity that requires you to find a new place to live, or you could even be looking for a safer neighborhood. Whatever the reason, you should be able to do so without the financial burden of late mortgage payments.
Downsize or expand
Over time, a home can sometimes become too small or too big! If you have a family that’s growing in size or a roommate that’s moving out, you might be looking to move to a space that better fits your needs. Whether you’re planning for the future or adapting to new circumstances, mortgage payments shouldn’t hold you back.
Gain capital
Another reason individuals may be looking to move is a need for additional capital. When you purchased your home, you made a significant investment. If you were to sell it, there’s a possibility you may make more than you initially paid for it. This extra capital could go toward your savings or even a down payment on a new place to live. But once again, you can’t sell your home for additional capital if you’ve fallen behind on paying your mortgage.
While the inability to stay up on mortgage payments can make dreams of moving or changing seem impossible, United Housing is here to help. Through our COVID-19 Mortgage Relief Program, we’re helping people like you keep your home, relocate, downsize or to sell. To learn more or to see if you qualify for mortgage assistance, click here. And if you’d like to hear more about the other homebuyer resources we offer, visit our website today.
CARES funds part two: the human impact
Over the last year, grant programs and funding options have become available to nonprofits to help us alleviate our clients’ burdens caused by COVID-19. UHI secured varied funding to provide emergency support to our clients and maintain housing stability in Memphis. One avenue of CARES support came through our Home Repair Loan program. Read stories from UHI clients about the impact this program had on their lives:
Senior UHI client, Joyce, found herself in need of major home repairs. Not only did her foundation need to be stabilized, but most of her plumbing had to be repaired or replaced. As a former real estate agent, Joyce had a lot of experience in financing home repairs, and was familiar with many programs like UHI’s Home Repair Loan program. However, her experience was like none she had ever had before:
“In over 50 years of working with the public, I have never had the type of help that I received from United Housing,” said Joyce. “It’s a great program, not only for seniors, but for anyone that can qualify.”
Another one of UHI’s Home Repair Loan recipients, Barbara, discovered a wiring issue in her newly purchased home that created a fire hazard. Unable to get the money or loans for repairs, Barbara was left in a dangerous home without options. Luckily, she found UHI and was able to apply for our Home Repair Loan which covered the cost of her essential repairs.
“I would not be at my current home if not for United Housing,” said Barbara. “Without United Housing, I do not know where I would be.”
UHI client Pam was searching for funds to repair her mother’s house. Pam’s elderly mother uses a walker, which meant she required an accessible bathroom. She also had uneven floors in her kitchen which posed a falling hazard. Pam was able to get in touch with UHI and apply for the Home Repair Loan. Her mother’s newly repaired home has given her self-confidence:
“The home repairs have given my mother back her dignity and pride,” said Pam. “Now, she’s able to do a lot of things for herself.”
If you’re interested in learning more about our home improvement repair loan, click here. If you or a loved one is in need of home improvement, don’t wait, visit our website and apply today.
Housing and young adults: Be wary of predatory lenders
Predatory lending is the unethical practice of offering loans to individuals at rates they will not be able to pay back. This catches vulnerable people in a vicious debt cycle, harming their credit score and making a debt-free future feel impossible. Predatory lending is dangerous for everyone, but if you’re a young adult, such as a new high school or college graduate, it can be especially dangerous for you.
Payday loans have the highest interest rates in the industry with average annual percentage rates between 391% and 521%. This massively increases the total repayment price, meaning only about 2% of payday borrowers can actually afford to pay back the loan. To make matters worse, predatory lenders are often given direct access to borrowers' checking accounts so they can withdraw money before the borrower is able to pay necessary bills and other expenses.
Young people possess many of the characteristics payday lenders target. For example, young people on average have lower salaries than their tenured, older peers, and are more likely to rent than own their homes. A study conducted by Pew Charitable Trusts found people making less than $40,000 were 62% more likely to utilize payday loans, and that renters were 57% more likely to borrow from predatory lenders compared to homeowners. Additionally, the National Education Association noted that payday loans are increasingly being marketed to young people because they’re more likely to have student loan debt.
Unfortunately, Tennessee has the highest number of predatory lenders in the country. Our state has more than 1,200 predatory lending locations in 89 of Tennessee’s 95 counties. Additionally, Shelby County has one of the highest rates of predatory lending in the country. Our home county leads the state with the highest number of predatory loan locations with more than 232. Shelby County also has the second highest concentration of predatory lenders per capita at 25 lenders per 100,000 residents.
But predatory lending doesn’t only come in the form of payday lenders. Many financial institutions specifically target young people through the homebuying process through inflated, unnecessary fees and charges, or misrepresentation of the loan’s terms or risks. Other predatory lending tactics include convincing borrowers to continually refinance their home, with no benefit to them, using coercive sales tactics and even encouraging borrowers to lie about their finances so that they can get a loan.
There are several tips you can follow to avoid and spot predatory lending at any age. For example, never let anyone convince you to make false statements on your loan applications, and ensure you read anything you’re given thoroughly and ask a lot of questions.
However, one of the best ways that you can avoid predatory lending as a young person is to contact United Housing so that we can help you get started off on the right foot. UHI offers a loan product specifically for refinancing predatory loans, in addition to general financial counseling services, homebuyer education courses, loan products and more. UHI can provide personalized advice and support to guide you through any financial situation. Give us a call today at 901-272-1122.
Meeting essential needs through CARES funds
Since the beginning of the pandemic, United Housing has aimed to alleviate our clients’ burdens caused by COVID-19. Over the last year, many grant programs and funding options have become available to nonprofits to help us do just that. UHI secured varied types of aid funding so we can provide emergency support to our clients and maintain housing stability in Memphis. Here are some of the areas in which needs have been met so far:
In November, UHI partnered with the City of Memphis’ Department of Housing and Community Development, as well as other HUD-certified counseling agencies around the city, to launch the COVID-19 Housing Assistance Program (CHAP). CHAP offered mortgage and rental assistance to Memphians who were facing eviction or foreclosure because of the pandemic. While the CHAP programming did not guarantee housing continuity, it did provide needed relief to families across the city, alleviating financial burdens and helping people find housing stability. Through CHAP, UHI was able to help 300 families mitigate eviction and foreclosure.
In addition to its CHAP programming, UHI supported homeowners and renters in Memphis and Shelby County through Emergency Utility Assistance. Individuals who missed MLGW payments due to financial hardship brought on by COVID-19 were able to apply and receive essential funds to cover back payments. Additionally, UHI used its CARES funds to aid in home repair. Over 30 homeowners who have had much needed repairs for quite some time were finally able to make them with assistance from UHI.
One loan recipient shared her story, and it demonstrates the importance of repair funding for homeowners. Before UHI’s help with her home repair, Pam Gray’s mother was living in unsafe living conditions. Her bathroom floor was sinking, creating a fall risk. With the help of UHI, her mom was able to make essential repairs that have impacted their entire family.
“The impact UHI’s home repair loan had on me is intertwined with the impact on my mother,” Pam said. “It has given her self-confidence now [as she can] get around in the bathroom and kitchen. It has also given her dignity and pride, she could do a lot of things herself.”
In its latest effort toward crucial support through CARES funds, United Housing launched its COVID-19 Mortgage Relief Program. The program provides counseling and financial assistance to Mid-South residents facing foreclosure because of a COVID-19 related hardship and was funded in part by the City of Memphis and the Community Foundation of Greater Memphis. Some applicants to the Mortgage Relief Program may not be eligible for financial assistance, but they are still connected with one of UHI’s HUD-Approved Housing Counselors who will help them create a plan that leads to long-term housing security.
Despite the curveballs 2020 threw, and the challenges that are still arising because of it, United Housing was and is prepared for the job. We remain committed to providing quality housing opportunities to Mid-South residents through financial education, mortgage lending, home building and renovation. But most of all, UHI is dedicated to the support of its clients, whether it is through the purchase of their first home or the fear of foreclosure, UHI promises to be with you every step of the way.
Stop Home Scams: Knowing what to look for
COVID-19 has created a housing insecurity crisis. Families across the country are struggling with newfound uncertainty and increasing fragility surrounding their living situations. Unfortunately, scammers use crisis situations like these to prey on people’s fears and insecurities. That’s why it’s so important to pay attention to and learn more about housing scams.
Luckily, our friends at NeighborWorks America are partnering with the Wells Fargo Foundation, National Fair Housing Alliance and National Foundation for Credit Counseling to create a public education initiative aimed at helping consumers take action to protect themselves and their homes from scammers. They have already offered helpful tips to identify and avoid scams:
Do not pay anyone who is not your mortgage lender.
If someone contacts you and asks about home payment, do not pay them. The only entities that should be dealing with your mortgage payments are you, your lender and your certified housing counselor if you’re working with one. Additionally, if anyone gets in contact with you to tell you to stop paying your monthly mortgage payments, do not listen to them. Trying to get someone to halt their payments is a sure sign of a scam.
Do not give any personal or financial information to someone you do not know.
A great general rule is to not give any personal information to anyone who is not a licensed professional or personal friend, especially over the phone. That being said, if someone calls requesting information regarding your personal finances or housing situation, do not answer their questions until you can credibly verify who they are. If you cannot, there is no reason to move forward with any further conversation.
Do not listen to promises.
Someone might try to contact you and tell you that they can fix whatever housing insecurity you might be facing. For example, the person might promise to prevent your home being foreclosed on, or might promise to give you money for your next monthly payment. All payment plans should be arranged directly with your mortgage lender and your housing counselor – and neither will EVER promise you they can stop foreclosure or eviction. They will only provide the best options and counseling with the goal of preventing home loss. Promises of “free” money without certified counseling and expert intervention are a sure sign of a scam, as nobody can guarantee you will not be foreclosed upon or evicted. Also, if someone promises to provide a housing-related service for you, such as lawn care, do NOT pay them before the service has been completed, no matter how sincere their “promise” to get it done is.
Find out what your options are
One of the best ways that you can fight against scams is by becoming informed and arming yourself with knowledge as early in the process as possible. Talk to one of United Housing’s HUD-certified housing counselors, or any one of our team members. We want to help you find housing stability and give you real, practical ways to help you with whatever obstacles you may be facing. Regardless of moratorium deadlines, we can help you get on the path to foreclosure prevention now. The earlier you start the process, the better. Visit https://www.uhinc.org/education/foreclosure-counseling to get started with one of our counselors.
If you are suspicious that someone has tried to scam you or a neighbor, whether they were successful or not, please report the situation to the appropriate authorities such as the Federal Trade Commission (FTC) or the Consumer Financial Protection Bureau. For more resources on stopping scams, visit https://www.stophomescams.org/.
Foreclosure in Memphis: what you need to know
If you’re facing foreclosure in Memphis because of hardships caused by COVID-19, there is help out there for you. By connecting with United Housing, you’ve come to the right place.
No one expects you to know what to do on your own when you’re facing foreclosure. Our team of educated housing counselors can help you better understand the options you have that could help you keep your house. They will also walk you through the process – you do not have to go through this alone. You can start the housing counseling process by filling out this online form. If you’re facing foreclosure, we encourage you to sign up as soon as possible.
Before you start housing counseling, there are a few things you can do on your own. By taking these steps, you’re gathering information that will help your housing counselor and could help you keep your home.
To help you create a plan, our housing counselors need to know who owns your loan. If you’re not sure, you can use this free online tool to find out. Why is this important? Different lenders handle foreclosure support differently. Knowing who owns your loan will help us create the best repayment plan for your family.
2. Learn about CARES Act support and forbearance.
Government support can be confusing, especially when it comes to homeownership. Even if you read or watch the news and try to keep up with the most recent changes, it’s easy to misunderstand what help is available. This online tool from Freddie Mac explains important topics you should understand before you attend your counseling session: forbearance and CARES Act support. Read through this guide and click on the “+” icons to expand specific topics. Reading through this page a few times can help you better understand these topics and how they apply to your situation.
3. Prepare questions for your counselor.
You don’t have to come to your housing counseling session knowing everything about the CARES Act and forbearance. But reading about these topics ahead of time can help you prepare questions. As you read through the interactive online guide from Freddie Mac, write down questions for your housing counselor. They will be able to answer your questions and explain topics in more detail.
4. Continue to follow United Housing for more help.
United Housing is here to help. When you follow us on Facebook, you can learn about upcoming workshops or classes from United Housing and other trustworthy organizations in Memphis. These classes and workshops are a great way to learn more about housing, homeownership and specific topics like foreclosure.
If you live in Memphis and need help to keep your home, reach out to United Housing today. You can visit our website or call 901-272-1122.
How does debt factor into the homebuying process?
Finances are highly personal, and it can feel overwhelming when you’re trying to buy a home and you suddenly have to share a lot of personal financial information. You might even feel judged or embarrassed to share your debt information with a potential lender. The average American is about $38,000 in debt, so you are certainly not alone if you enter the homebuying process with outstanding debt. But it’s important to understand your personal financial information in relation to your debt and how that will impact your homebuying process.
How does debt impact my ability to buy a home?
Debt is one of the largest factors mortgage lenders consider when you apply for a home loan. Specifically, mortgage lenders will look at your debt-to-income ratio – or how much of your monthly income immediately goes toward paying down your existing debt. If you think about it, you consider your debt-to-income ratio every month when you make purchasing decisions. In your budget, you likely subtract your expenses (like debt repayment) from your income to determine how much money you can spend in a month. Your mortgage lender is doing this same process.
The specific debt-to-income ratio your mortgage lender is looking for will vary. But generally, most lenders look for a debt to income ratio below 43%. Of course, a lower debt-to-income ratio is favorable to lenders because it means you are more likely to be able to cover the cost of your mortgage on a monthly basis without overextending yourself financially.
Another way debt might impact your ability to buy a home is through your credit score. Your credit score is an easy way for financial institutions to see how reliable you are as a lender. Your credit score is built using a number of factors, but many of them are linked to debt. You can build your credit score by making your debt repayments on time every month, limiting outstanding debt on credit cards and reducing the number of debt accounts you have at one time.
Is all debt the same to my mortgage lender?
Most common types of debt are considered equal to mortgage lenders. Things like autopayments, student loans, personal loans and credit cards are all factored into your debt-to-income ratio. But, it’s important to talk with your lender, as some debts might be treated differently depending upon your mortgage options. For example some lenders subtract alimony payments from your monthly income but don’t include it in your debt-to-income ratio. This can sometimes make it easier for you to qualify for a loan.
There are a few things that you might consider debt that aren’t by your mortgage lender. Things like your monthly phone plan, gym memberships, or other subscription services are not counted as debt. It is still important to factor those costs into your monthly budget, though.
How can I use information about my personal debt to make a smart homebuying choice?
Understanding your personal financial situation, including your outstanding debt, is important to help you make the best homebuying decision for your family. When you work with one of United Housing’s homebuying counselors, they can help walk you through that process. Some families might need to work on paying off debt and raising their credit for a year before starting the homebuying process. Other families need to closely monitor their budget to determine how large of a mortgage payment they can comfortably afford. Regardless of your situation, our team of well-trained experts will help you understand your financial situation and will guide you toward the decision and home that is right for you.
Gentrification vs. Revitalization – What’s the difference?
When you move into a neighborhood, you want to see new businesses rise up on your block, neighbors renovating their houses, and general improvements happening around you. But, not all improvement is equal, and sometimes too much improvement can put you, the homeowner, in a difficult financial position. Today, we’re going to talk about gentrification, the dangers of this process, and a community-centered alternative.
What is gentrification?
As its defined by Webster’s New World College Dictionary, to gentrify means “to convert (a deteriorated or aging area in a city) into a more affluent middle-class neighborhood, as by remodeling dwellings, resulting in increased property values and in displacement of the poor.” Simply put, gentrification is the process of changing the texture and culture of a neighborhood and raising prices along the way to the point where original homeowners can no longer afford to live there.
If you think about the city you live in, you can likely think of examples of gentrified neighborhoods. From the outside, gentrification often looks appealing. Residents from outside of the community view it as “cleaning up” the city and adding amenities that “all” people can share. But in reality, gentrification pushes often long-standing residents out of their homes as property taxes, rental rates and home prices rise.
Why does gentrification happen?
There are a number of reasons why gentrification happens. Oftentimes, investors target “inexpensive” neighborhoods in close proximity to neighborhoods with more wealth. They take advantage of the lower barrier to entry that comes with purchasing foreclosed or unoccupied properties, and they quickly add new amenities to attract money from outside of the neighborhood. Once a few investors come in and find success, other investors come in and do the same thing to businesses and houses. It continues to escalate from there – often to the point where people are approaching homeowners or traditional businesses and asking them to sell their space to make way for “progress” in the neighborhood.
Why is gentrification harmful?
Healthy cities need neighborhoods with varied home sizes and prices. This helps the most people find stability and create generational wealth through homeownership. The greatest harm that gentrification poses to neighborhoods is the displacement of long-term residents living in “inexpensive” neighborhoods. As property values increase, so do taxes. Sometimes, homeowners are forced to move because they can no longer afford to live in the neighborhood. Simultaneously, as outside investors plant businesses in neighborhoods undergoing gentrification, patrons start filling the pockets of outside investors. This does not keep capital in the community in the way that supporting a locally owned business would. In addition to displacement and money leaving the community, gentrification can strip the cultural texture of a neighborhood. Local eateries, businesses, parks, art installations, and even architectural style are changed during the renovation process. The features that original residents love about the neighborhood can start to fade away as outside influences make changes.
What’s the alternative?
You can improve and strengthen neighborhoods without gentrification, and the key is supporting revitalization efforts within the community. Through programming, like the business development programming sponsored by JPMorgan Chase, neighborhood residents can receive funding and training to open businesses in the communities they call home. By supporting local business growth, you are adding amenities and resources, encouraging cultural maintenance while investing capital into your neighbors. Another example is the Binghampton Community Land Trust. This coalition of active residents oversee renovation projects in the neighborhood. They identify blighted properties and invest funds to turn these homes into viable, affordable options for future homeowners. The projects have financial restrictions that help maintain home values in the neighborhood.
United Housing works with financial institutions, the City, homeowners and other community development organizations to prevent gentrification and support community revitalization through strategic investments. We believe that this is one of the best ways to preserve communities, promote homeownership and strengthen our city.
Equity through Community Banking
Community banking
As you drive through your town, you’ve likely noticed community banks without even realizing you’re passing them. A community bank is exactly what it sounds like – a smaller, locally owned and operated bank that serves those in a particular area or community.
There are a few major differences between community banks when compared to regional and national banks. Community banks cannot serve customers out of state and instead focus on serving a specific set of customers in their area. For this reason, community bankers tend to understand the economic conditions of the area as well as the people who live there. This understanding makes community banks more likely to loan to borrowers in their community based on familiarity and family history rather than credit scores or traditional financial metrics. Additionally, community banks are small businesses themselves, making them more small business friendly. Community banks are a critical part of a healthy financial community because they are able to use traditional banking activities to pour back into their respective communities without some of the barriers that come with regional and national banks.
Banking and systemic discrimination
Most importantly, community banks are often located in underbanked communities in rural areas or inner cities. In urban, inner-city areas, community banks often serve a large Black population, which is significant as the Black community has been historically discriminated against financially, largely by regional and national banks. In an interview with NPR, Black bank owner Sidney King points out that many Black communities often feel big, national banks aren’t for them, as their parents and grandparents didn’t have banking relationships due to this systemic bias. Community banks that serve Black individuals are often also minority or Black-owned and can be vital to rebuilding trust between financial institutions and the Black community.
What now?
Unfortunately, race-based discrimination in banking still exists. Last year in Memphis, 13% of Black shoppers were denied a mortgage, while only 5% of white shoppers faced the same rejection, and predatory mortgage lenders are still more likely to target people of color.
United Housing has always worked to break down barriers that traditionally underserved Memphians face in the homeownership industry. Through loan programs like our new Build Bold Fund, we hope to raise money and forge partnerships with community banks to support individuals who cannot get approved for a loan through a regional or national bank. Another great way to combat financial inequity in your community is by supporting and investing in your local community bank. By opening a checking account or taking out a loan through a community bank, you are pouring your resources back into your neighborhood and the people who call it home.
Community banks give Memphians of all backgrounds the opportunity to be approved for loans and less likely to turn to potentially predatory lenders for financial help. To learn more about being approved for a loan, contact United Housing today at 901-272-1122.
Three things to do before you list your home
Preparing to list your home can be a time-consuming process. Many families spend weeks organizing closets, touching up paint and cleaning all the nooks and crannies to make sure their home is ready for potential buyers to visit. Preparing to list your home, especially if you have big plans to move, can be an exciting process! In all of that excitement, a few important steps might fall through the cracks. Here are three things to add to your to-do list that will help you get the most money out of your home as you prepare to sell:
1. Hold your own inspection to identify any issues you might need to fix.
When you purchased your home, you likely enlisted a home inspector to examine the house before you closed. Traditionally, buyers hire home inspectors to ensure the home they’re purchasing doesn’t have any outstanding issues or problems that should be considered in the sale process. It is common for buyers to request sellers to make repairs to problems as part of their contract. Unfortunately, many sellers enter the process without knowing these problems exist. When sellers have to make repairs or lower their selling price, they ultimately cut into the money they take home after they sell.
Before you list your home, hire an inspector to come out and thoroughly review your home. This inspector should be able to identify issues that you should repair before your home goes on the market, giving you time to make updates before you list. Even if you don’t choose to make the repairs recommended by the inspector, you will go into the selling process with a better understanding of what a potential buyer might ask you to repair or fund as part of the sale. This can help you determine a fair asking price and set your expectations for profit.
2. Research comparable home prices in your neighborhood.
A large part of the homebuying and selling process is setting personal expectations. You can save yourself a lot of heartache and struggle during the negotiating process if you base your asking price on research. In the months leading up to listing your home, track home prices in your neighborhood. You can do this online or using resources in the local newspaper. See how much money people are paying for homes comparable in size to your own within your zip code. Consider not only homes that have the same square footage as you, but also take into account how many bedrooms and bathrooms your home has compared to homes you’re watching. A house with more bedrooms or bathrooms than yours might sell for a higher price even if the square footage is comparable. If you use online sites like Zillow, Redfin or Trulia, you can also see the condition of homes in your neighborhood. Understanding how your home compares in terms of updates and renovations can give you a better understanding of your future asking price.
3. Enlist the help of a reliable Realtor.
A lot of sellers are tempted to list their homes themselves because of the commission fees that Realtors take after the sale. But partnering with a Realtor can save you a lot of time and money, so we always recommend working with an agent you trust. A Realtor can help you make decisions that will impact your sale – like the time you list and whether or not you should have an open house. When they walk through your home, they can identify your home’s best assets based on market trends and can tout those in your listing language. They often have access to professional photographers who will make your home look exceptional in online listings. Though you should do your research in step two, after walking through your home and surveying your neighborhood, your Realtor can help you set a realistic asking price. All of these factors will ultimately help you get the most money out of your home when you finally sell.
Affordable home maintenance for older homes. What resources are available to help you refurbish or maintain an older home?
The average home in Memphis is 46 years old, meaning many homeowners in our community live in houses that have been around longer than they have. Most people have great experiences in old homes, however, their rich history means they might be in need of a little more TLC. So, what options are available for you to do some home maintenance on your older home?
Simple touches
Don’t let outdated finishes or a bit of wallpaper discourage you from buying an older home! There are simple things you can do to refurbish your old home that only require a hardware store and a little dip into your budget. Things like adding fresh or new coats of paint, replacing door knobs or cabinet pulls, and investing in a new light fixture or two can make a home feel brand new. Some repairs you can do easily and inexpensively, such as filling holes left in a wall or using a little oil to fix a squeaky door. However, many older homes need work done that requires a professional, significant financial investment, or both. Luckily, there are several resources available to help you maintain your home.
MLGW weatherization and home repair programming
MLGW’s Share the Pennies is a community contribution program that allows homeowners to round up their bill payments and apply the money toward grants for low income tenants to make weatherization or energy efficiency repairs to their homes. This not only provides assistance to make necessary home repairs that old homes often need, but helps you to save money in the long run by cutting energy costs and lowering your utility bill.
Post Purchase support and Home Repair Loan options through UHI
Older homes can present serious challenges that you’ll want to address – they may need a new roof, lead-based paint abatement, new HVAC, foundational updates, and much more. Luckly, United Housing offers several resources that can help you with the process of refurbishing or maintaining an older home. Our Home Repair Loan program can help you upgrade your home for accessibility and security, and can be used for a variety of projects including plumbing, roofing, electrical and more. The loans range from $5,000 to $15,000 and have a low, fixed interest rate with affordable monthly payments over a repayment term of 10 years. You can click here to find out if you’re eligible for a home repair loan. Additionally, UHI offers Post-Purchase homeowner workshops that focus on teaching new homeowners how to successfully navigate homeownership by providing education on budgeting, credit, insurance and other financial responsibilities that come with owning and maintaining a home.
Old houses are charming, and are usually very well built and full of character – but you might find a few more needed renovations in them than you would in a newer home. However, don’t let that discourage you. Call United Housing at 901-272-1122 and start making plans as to how you could fix up your house. With the necessary support and resources, you can create a home for you and your family to enjoy for years to come.
How to talk with your children and family about eviction or foreclosure
Due to COVID-19, many families are finding themselves faced with the possibility of eviction or foreclosure. These things can be frightening as an adult, so it is especially scary for kids who might not even be exactly sure what these words mean – which is why you should talk openly about these issues with your children. These are struggles many people with and without children face, the best thing you can do is talk openly about it with your kids. Here’s how:
Be honest
It’s important to be honest when speaking with children about sensitive topics like eviction and foreclosure. Don’t hide anything from them, and be sure you answer all of the questions they might have. Of course, you do not have to tell them everything, but giving them some information will allow them to better navigate the situation and is better than leaving them in the dark.
Include them
Another way to extend your conversations with your kids about these topics is by keeping them updated and included in the process. Now, you don’t have to take your child with you to meet with a lawyer, however, it’s important that they know what could be coming next. Try to explain what steps you might be taking soon and how it could affect them. This will allow them to feel more at ease, as they’ll know what to expect, while also teaching them life skills that could come in handy in the future.
Provide reassurance
While this can be a difficult time, it’s important that as an adult, you try to have a handle on your own emotions during conversations with your child surrounding these topics. Kids will be scared and anxious, so you should be someone they can turn to with their questions and uncertainties. Be strong for them by acting as you normally would, providing them with the reassurance that although their housing situation might change, you will not.
Consider its impact on them
Above all, be cognizant of the individual changes your child might have to go through, and the significant impact it can have on their lives. It could be more than just moving homes, but potentially moving school districts and leaving a neighborhood of friends and familiar faces. It’s common for us to view kids as resilient, which they are, but we shouldn’t discount the profound impact change can have on their lives
It’s important that you remember that these things, although they might feel like it, are NOT the end of the road, and finding yourself with an eviction notice or with your home in danger of foreclosure, has nothing to do with what kind of parent you are, and how much you love your family. Homeownership is still possible, regardless of any setback. Call United Housing today, and we can help you get back on your feet.
How do adjusted mortgages play out?
If you contacted your mortgage provider about a forbearance and were approved, you might be wondering how repayment works. The good news is that you’re not expected or required to repay your missed mortgage payments in one lump sum. There are several common options you might be presented with – each with its own benefits and drawbacks. Here are several options you might receive and the facts about each:
1. Repay in one lump sum.
If you have the financial means to repay your mortgage in one lump sum, this is a great option to pursue. Of course, it requires a large lump sum of money up front. But, you do not accrue additional interest, and you can enjoy the relief that comes from paying off the debt. However, this is not an expectation, and you should not put yourself in a financial bind to pay off missed payments in one lump sum.
2. Pay more toward your mortgage each month for a period of time.
Your lender might allow you to increase your monthly payment for a period of time until the amount of your missed payment is satisfied. The benefit that comes with this option is that you do not extend the life of your loan, and therefore do not pay more in interest over time. However, this option might not be feasible if you are still experiencing financial hardship or have a restricted budget.
3. Add your missed payments to the back end of your loan.
Your lender could allow you to add missed payments to the end of your loan, extending the life of your mortgage by several months. If you cannot afford to make additional payments now, this is a great option. However, you will end up paying more over time for your loan as you will accrue additional interest. The additional expense over time could vary greatly depending upon the value of your home and the terms of your loan.
4. Adjust your loan payments entirely and extend the life of your loan.
If your financial circumstances have changed and your current mortgage payment is no longer feasible, your lender may allow you to adjust the terms of your loan in a way that lowers your monthly payment. This is a great option if you are looking for a way to keep your home and fear that you won’t be able to make payments if your monthly mortgage stays the same. However, adjusting the terms of your loan could impact your interest rate and will likely extend your mortgage, meaning you will pay more in the long run. But, a home is an investment, and this is a great option that will allow you to stay in your home long term.
5. Place missed payments into a junior lien, which must be repaid if you refinance or sell your home.
Some mortgage lenders will place a junior lien against your home for the total sum of your missed payments. This sounds more intimidating than it is – really, all it means is that when you sell your home or refinance your home, you have to pay back the loan before you can take a profit. So, if you’re going to sell your home for a $15,000 profit, and your lien is $3,000, then you’ll actually take home $12,000. This option cuts into future earnings but doesn’t impact the life of your loan or your interest rate.
It’s important to remember that each of the options above might not be presented to you. You’ll have to talk with your lender about your options to determine which is best for you. If you’re struggling to choose between repayment plans, talk with the housing counselors at United Housing by calling 901-272-1122.
Eviction is not the end of the road
Our city is facing an eviction crisis – and you or a loved one might be trying to navigate the process. While local agencies, nonprofits, attorneys and community activists are working to keep people in their homes, it is likely that hundreds, if not thousands, of families will lose their homes over the next few months.
The eviction process can be disheartening, traumatic and confusing. To have the roof over your head taken away from you can lead you to a negative emotional state. But there is still hope – even if you’ve been evicted there are organizations like United Housing that want you to get back on your feet and guide you toward homeownership.
Is homeownership realistic if I’ve been evicted?
Yes. There is no situation where a person cannot start working toward homeownership. Some individuals work toward this goal more quickly than others, but the team at United Housing will support you for as long as it takes to get you into your new home. We can help you build your credit, which might be affected by your eviction if your late payments were turned over to a collection agency. Then, we’ll help you build a budget so you can save for homebuying expenses. We’ll educate you on the homebuying process and connect you with reputable loan officers. There is a path toward homeownership for everyone.
Why homeownership?
Owning your home creates a more stable environment, one where you’re in control. Homeowners don’t have to answer to landlords or leasing agents, and many feel empowered because they own the place where they live. In Memphis, many of our clients find that the mortgage they pay on a home they own is less than they paid in rent, making budgeting easier for many families while simultaneously providing more space and independence. Homeownership is also an investment in yourself. Every mortgage payment you make is an investment in the future profit you make when you go to sell your home.
What does this process look like?
It starts with asking for help. Our team of trained professionals are here to help assess your situation and provide support. From connecting you with immediate housing support to creating a credit improvement plan and helping you apply for loans you need, our HUD Housing Counselors and loan officers are here to support. What are you waiting for? Call UHI today at 901-272-1122.
Homeownership is for everyone – including young people
Homeownership is an intimidating process that many people think is too complicated or expensive for them to pursue. Historically, candidates for first-time homebuying were in their mid-20s through their early 30s. The generation that is currently within this age, millennials, carries $1 trillion in student loan debt, exponentially more than any previous generation. For some people, this debt fills the line in the budget previously allotted for housing.
Whether or not student loan debt is a factor, many young people assume that they could never afford to buy a house. Others believe they simply don’t need to buy a house. And while homeownership may seem out of reach, it is achievable and beneficial for most people with planning, budgeting and education. We’re debunking four homeownership myths to help you see how attainable and helpful homeownership can be for young people.
1. I have to have a 20% down payment to buy a house.
A down payment is the amount of money a homebuyer puts forward at the time of sale. While conventional mortgages require a 20% down payment to buy a house, there are other common mortgage loan types with more manageable down payment requirements. Federal Housing Administration and Veterans Affairs loans are great options for many young people and first-time homebuyers, and they require as little as 3.5% down. There are also down payment assistance programs offered by local and state governments for down payment assistance. Through these programs, qualified buyers can buy a home with 1.5% down. That makes the amount of money you have to save to start the process more affordable.
2. It’s cheaper to rent than it is to own.
One of the best things about purchasing a home is the control you have over what you spend. As you’re looking at houses, your mortgage lender can tell you the estimated cost you’ll pay per month for each house you’re considering. One thing that surprises UHI clients is that you can often finance a home so your mortgage payments are less than what you’re currently paying in rent! You can absolutely find a home that fits your desired monthly payment – below, at or above what you’re currently paying in rent.
3. I don’t have a partner, so I could never afford the payments.
Homeownership is not dependent upon your relationship status. Many young homeowners can afford to purchase a home and live on their own, but some people like the company of roommates. As the homeowner, you act as the landlord to your roommates, collecting rent to help cover your mortgage payments.
Depending upon the size of your house, the number of roommates you have and your monthly mortgage note, you might be able to free up some of your personal budget to save for unexpected repairs, home renovations or other expenses.
4. I’m taking on a lot of risk buying a house – I don’t want to be stuck here forever.
Any major investment assumes some risk, and a house is no exception. However, property and a home are some of the most stable investments a person can make. You’re never guaranteed equity, but most homes appreciate in value over time. So, if you’re planning on staying in your current city for the next few years, you’re likely to make a little bit of money if you buy a home. Buying a home is an investment in yourself and your future – renting is an investment in someone else’s property.