A recent national survey by Fannie Mae revealed that Hispanics place more value on the idea of homeownership than all Americans, and 73 percent of Latinos believe that owning a home is a good way to build wealth to pass along to their families. However, trends suggest Hispanics are more likely to lack basic financial literacy skills, which can hamper the community’s home buying and long-term financial success.
The first-time home buying process can seem like a daunting experience. But with the right resources, such as TD Bank’s five-step guide for first-time home buyers, Latinos can turn the process of buying a family home into a teachable financial experience for both themselves and their children. Here is some of TD’s advice:
1. The importance of saving.
* According to a recent national survey by the National Foundation for Credit Counseling, nearly half of Hispanics polled revealed they do not have savings.
* The best way to teach children about saving is by encouraging them to do it. If they get a weekly allowance, ask them to put away 25 percent to save enough to purchase the latest video game or toy they want.
* Then, explain to your children what a down payment is, and how saving for one can help reduce a home’s cost. The bigger the down payment, the smaller your home loan, therefore the lower the interest rate.
2. Budgeting and determining what you can afford.
* Living within your means is key to long-term financial success. Unfortunately, Hispanics are more likely to report struggling to pay their bills on time, which presumably means many Hispanics spend more than they make. It’s important to discuss budgeting at an early age with children.
* By reviewing your income and current monthly debts, you can determine your ideal monthly mortgage payment. From there, you will be able to narrow the focus of your house hunt to homes you can afford.
3. Understanding credit and loans.
* Having bad or little credit makes the goal of owning a home a struggle.
* To drive home the lesson about credit and loans, offer your children a loan to purchase the new shoes or outfit they want. Require them pay you back monthly with a portion of their weekly allowance.