Facts First-Time Homebuyers Really Should Know

Purchasing a home is likely the largest investment a person will make in his or her financial life. Fortunately, there are resources available to make the process of securing a mortgage and locking into that commitment more welcoming for would-be buyers.

While options abound, there are some benefits inherent to working with a small community bank, particularly for first-time homebuyers. Unlike larger banks, community banks typically don’t have a crushing volume of transactions to deal with. They also aren’t under the same kind of pressures to expedite the process, allowing more flexibility to meet a first-time homebuyer where they are at.

Many of the barriers that kept the benefits of homeownership and wealth accumulation out of reach for marginalized populations are a thing of the past. Here are five benefits your community bank may offer and that are worth looking into.

Educational seminars– An informed buyer is a well-prepared buyer. Most community banks in the Hudson Valley offer workshops to educate the public on available programs and services from the consideration to contract phase. These information sessions equip buyers with the tools and information they need to confidently navigate the homeownership journey. Most seminars also allow for question-and-answer sessions and give buyers a chance to meet the professionals they’ll be working with early on in the process, so there’s a rapport from the start.

Specialized programs – Saving up huge sums of money in this day and age can be difficult, but that doesn’t preclude someone from being a responsible buyer. Programs such as Tompkins Mahopac Bank’s Community One, for instance, and other similar first-time homebuyer initiatives locally, allow for a five percent down payment for eligible single-family homes, townhouses and condos, with no geographic restrictions or private mortgage insurance. While credit approval or income checks and other qualifying guidelines apply, this program can be a literal door opener.

A holistic view – Most community banks are able to take a wider look at a buyer’s qualifications beyond simply credit history. This is especially important because approximately 26 million Americans are “credit invisible,” meaning they lack a credit history with one or more of the nationwide credit reporting agencies and prefer to operate on a cash basis. This can lead to inherent bias in credit scoring.

This opportunity gap disproportionately affects Black and Hispanic individuals, according to the Consumer Financial Protection Bureau, with 1 in 5 Black consumers and 1 in 9 Hispanic consumers holding FICO scores below 620. On the flip side, only 1 in 19 white individuals fall into the sub-620 credit score category. In general, there is a marked difference between Black homeownership levels and non-Hispanic whites; 44% of Black people were homeowners at the end of 2020 versus 74.5% of non-Hispanic whites, according to a recent article in Forbes. Community banks like ours look not just at credit history, but take into account other signs of financial responsibility such as bills steadily paid by cancelled checks, bank statements, consistent payments and employment history. By staying away from credit scores and leaning on quickly obtained numbers, and instead gathering more information, homeownership becomes a more inclusive, and fair, proposition.

Higher touch–While most community banks have technology in the mix, such as online mortgage application portals for the tech savvy buyer who wants independence, smaller institutions usually have an ability to walk a first-time homebuyer through the process with more hand-holding and an individualized approach.

Long-term relationships – When the people you work with live, work and play where their customers do, there’s a greater opportunity to build a relationship. Community banks see the mortgage process as one step in a series of financial milestones an individual will encounter. Most community banking professionals want to be a resource to lean on for years to come and look at a mortgage as more than simply a transaction, but as a chance to develop a long-term partnership for years to come.

David Carey is a vice president and residential lending manager at Tompkins Mahopac Bank.