Introduction
This homebuyer’s toolkit will take readers through the process of buying a home: from financial readiness and knowing your rights, to using a real estate professional, and closing the sale. It connects potential homebuyers with free, online resources to check their credit reports, locate housing counselors, identify loan programs, and more. This toolkit also outlines the critical implications of homeownership not just for individuals and families, but for future generations.
Fair Housing
Every person has the right to live where they choose and can afford. The Fair Housing Act of 1968 is a federal law that prohibits discrimination based on seven categories, including race, religion, national origin, color, familial status (the presence of children under the age of 18 in a household), sex, and disability. Many states, counties, and towns have additional protected classes.
Getting Started
Homeownership is one of the best ways to build wealth. But it can be confusing if you’re unfamiliar with all the steps. This toolkit will guide you through the basics and provide resources for further information.
Here is an overview of the homebuying process. You can find more details in the step-by-step section below.
- Examine your financial readiness, including credit score and down payment savings.
- Get pre-qualified by a mortgage professional.
- Use a real estate professional to help guide you through the process.
- Shop for a home.
- Complete the closing process and move in!
Financial Preparedness
Learn how to increase your financial readiness. It’s never too early to start preparing for homeownership.
Work with a U.S. Department of Housing and Urban Development (HUD) certified housing counselor to determine how much you can spend on a mortgage and down payment, and learn about the factors that impact affordability, like your debt-to-income ratio. Set aside money for your down payment. Your housing counselor can let you know about local, state, and federal programs that may provide help with your down payment and provide affordable mortgage loans. Find a HUD-approved housing counseling agency here.
Did you know?
- Federal law entitles you to obtain a free copy of your credit report from the three major credit reporting agencies once every 12 months at this official website only www.annualcreditreport.com.
- A high percentage of credit reports contain significant errors. Review your credit reports to confirm their accuracy.
- HUD-certified counselors help assess your financial readiness and will work with you to develop a plan to increase your credit score. Counselors also assist with budget and financial literacy.
Buying a Home: Step by Step
The first step is to evaluate your credit score and finances. Lenders use your credit score to help determine if you qualify for a mortgage. Most loan programs require a minimum score of 620. If your score isn’t quite where it should be, you can look to nonprofit credit counseling agencies that provide free or low-cost guidance.
The next piece is savings for the down payment. It’s a myth that you need 20% down to purchase a home. There are many loan programs available for 3 to 3.5% down, and down payment and closing cost assistance is often available, especially for first-time buyers. Some of these programs require buyers to attend a homebuyer education course, so be sure to check out a local housing counseling agency.
Once you’ve determined that your credit and savings are in the right place, you’ll want to get preapproved for a loan. This is a critical step because it tells both you and your real estate agent exactly how much home you can afford before you look at properties. With a few pieces of information, such as your credit score, monthly income, and debt information, a mortgage lender can determine how much you qualify for.
Once you have your preapproval letter in hand, you’ll want to talk to a real estate agent. Licensed real estate agents can help you navigate the complicated process of homebuying. They show you properties for sale, have expert knowledge of neighborhoods and communities, help with the contract negotiation, and guide you through the many steps of homebuying.
It’s important to remember as you tour properties and find your dream home, that you have legal rights to protect you. The Fair Housing Act protects people from discrimination when they are engaging in housing-related activities.
Now, suppose you’ve found your perfect home and your purchase offer has been accepted. Things will move fast, and there are a lot of pieces to juggle. Don’t worry – your homebuying team is there to help. Those items can include: more financial documentation; home inspections; appraisal; property insurance; condo or homeowners association documents; title search; property survey; final walk-through.
Finally – the fun part! You get your keys, can move into your new house, and start making it a home. In all the excitement, make sure to familiarize yourself with the basics of your new home.
After Closing
Congratulations! You’re now a homeowner. Now that the excitement of the buying process and moving is over, you’ll want to make sure you’re ready for what comes next.
Make sure you:
- Know where the main electric and water shut-offs are.
- Know where to put trash and recycling and which days of the week it’s picked up.
- What utilities or other regular fees you’re responsible for, such as electric, water, oil, propane, or homeowner’s association or condo fees, and what company or vendor you should contact for service and payment.
- Plan for routine and seasonal maintenance. If the heating and air conditioning system uses filters, you’ll need to replace them regularly.
- Don’t forget to put fresh batteries in the smoke and carbon monoxide detectors (if applicable).
- Keep gutters and downspouts clear of leaves and debris, and make sure exterior water drains and vents don’t become clogged or blocked.
- Budget savings for future needs like appliances, roofs, windows, and heating and air conditioning systems.
Why It Matters
Homeownership is the pathway to the middle class. Fostering homeownership among people of color is one of the most effective ways to narrow the racial wealth gap and strengthen the economy, ensuring it serves all Americans.
Tax benefits
Homeowners can deduct both mortgage interest and property taxes from their annual income taxes.
Appreciation
The value of a house generally increases over time.
Grow Equity
Your equity grows as you pay down your mortgage. Over time, less of your payment goes toward interest and more goes toward lowering the balance on your loan.
Predictability
With a fixed-rate mortgage, payments won’t increase over time like rent does. Stable payments make financial planning easier.
Freedom
You own the home! You can use it however you like to meet your needs and lifestyle.
Stability
Staying in one location allows you to build relationships, form ties with the community, and put time and effort into making your house some where you love to live.
About the Keys Unlock Dreams Initiative
The National Fair Housing Alliance’s Keys Unlock Dreams Initiative (KUDI) is a nationwide effort to increase homeownership in communities of color, aiming to close the racial wealth gap, and to create fair and affordable housing opportunities for all. KUDI strives to unlock and demystify the American dream of owning a home.
For over 30 years, the National Fair Housing Alliance has vigorously pursued its mission to eliminate housing discrimination and ensure equal housing opportunities for all by partnering with more than 200 private, nonprofit housing organizations, state and local civil rights agencies, and individuals.