As America commemorates the 50th year of the Fair Housing Act, the unfortunate numbers have been repeated often: “The gap between White and Black homeownership is wider now than it was in 1960,” PBS reported earlier this year.
The reasons vary. In a nutshell, redlining, credit issues, and plain old race discrimination have been blamed for the homeownership disparity that partially results in the median net worth of White American families being 10 times greater than Black Americans, according to the New York Times.
But America does not lack those who, not only monitor such statistics but those who feel a charge to bring fairness and equality to the unjust situation that the numbers reveal. Lois Johnson, founder/CEO of United Security Financial Corp, is one of those people who recognize the crisis in Black homeownership and are determined to do her part to rectify it.
The former real estate sales agent and full-time accountant for the United Parcel Service believes a deficiency in financial education is a large part of the problem. She came to this conclusion after she found she could not acquire loans for people to whom she had sold a house without having to “put up a fight”. And on top of that, she couldn’t get a loan for her own church.
“I was a member of Faith Temple Pentecostal Church here in Salt Lake City, Utah and I was the business manager for the church,” Johnson said. “And we ran into a problem just trying to get a commercial loan for the church.
“And I said, ‘Well, that’s it. I think I’ll just try doing this myself,'” she continued. “I became a loan officer. I got really good at it. And I was able to get more people loans so I just took it from there and here I am today.”
More than 30 years later, Lois Johnson is among the leading independent home mortgage lenders in the nation. Licensed to operate in 49 states, she is the country’s only African-American Ginnie Mae lender and also issues Fannie Mae loans, which is a conventional lender. But even after working in the homeownership industry for 38 years, she still sees a plethora of problems.
In her decades of experience, she has come to believe the Black homeownership crisis is still existent due to information about home buying and mortgage lending being withheld from African-Americans. And she’s decided to do something about it. In the following conversation with the Trice Edney News Wire, Lois Johnson answers key questions about issues that hinder homeownership:
Why should homeownership be the centerpiece for a strategy to build legacy wealth in the African-American community?
Lois Johnson: Because a house is usually the largest item that will create wealth. Just think about it. If you buy a house and you stay in that house for a period of time, that house is going to become worth a lot more than what you paid for it. If you keep that house long enough the value of your home will grow. Then you can pull cash from your home and buy another home and still have value in it. On the other hand, big-ticket items such as cars and boats depreciate and sometimes can’t be resold or can only be sold for a lot less. But when you sell a house, you might get two, three or more times as much as you bought it for.
What is the minimum credit score (or FICO score) required to purchase a home?
Lois Johnson: The FHA [Federal Housing Administration] will take it at maybe 540. Most lenders won’t go any less than 620. That’s about the lowest FICO that the average lenders will take – including Ginnie Mae and Fannie Mae lenders. If we get too many low FICO scores it could cause our ratings to go down which could cause us to lose our Ginnie Mae licenses. That’s why Ginnie Mae issuers and Fannie Mae issuers don’t like to take low FICO scores. They’re putting themselves in jeopardy. Now, on the flip side of that, there are ways in which you can increase your FICO (credit) score.
What is the best way to repair and increase one’s credit score?
Lois Johnson: You may go to a credit repair agency or your lender can also tell you what to do. Then there are things that you can do on your own. For example, if you have a charge card and your limit is $1,000, your balance should never be any higher than 75 percent. In other words, you should never charge over $750, which is 75 percent of your loan limit. That will maintain your FICO score. Also, there may be collection items on your credit report that may be removed with a vendor settlement. That will increase your FICO Score as well.
What are some of the greatest obstacles to increase your credit score and what can be done about them?
Lois Johnson: Child support. Communicate with the child support recipient to make sure the amount on your credit report is accurate. If it is not, the recipient can draft a letter correcting the information that’s in the bureau. The agency then has to correct the information that’s been reported. This will increase your FICO score.
Also, always pay your bills on time. Some people think, well, if I pay it a day late, then that’s not bad credit. But that’s a late payment. As long as you pay that bill before the next payment is due, then that company will not report you as late.
Finally, if you have student loans and every last one of them is late, that pulls your credit score down. Whatever agency you’re paying for the student loan, have them combine them into one loan. Then have them make an adjustment on the payments. This will lower your debt ratio and enable you to make your payments on time. This will certainly increase your FICO score.
What are the psychological impediments to homeownership?
LJ: You shouldn’t listen to everything that people say. For example, it is said that you must have at least a 20 percent down payment to purchase a home. That’s just hearsay; in fact, you may purchase a home for as little as 3.5 percent down payment on an FHA loan or 0 percent down on a VA loan. And you may pay 3 percent or 5 percent down on a conventional loan. Also, there are many lenders who offer down payment assistance, such as United Security Financial (for more information, call 1-800-373-4186).
What are some of the special mortgage programs for people who are buying their homes for the first time?
LJ: There are down payment assistance programs as we indicated above. Then, there are lower down payment programs such as FHA, VA, and Fannie Mae loan programs. There are also state financing programs available to first time home buyers.
How long should a person wait to apply for a mortgage loan after bankruptcy?
LJ: That depends on whether you’re applying for a Federal Housing Administration, Veterans Affairs or a conventional loan. In most cases, it’s 3-5 years.
If somebody wants to apply for a home equity loan after they secure their first mortgage, how long does it take them to qualify for a home equity loan?
LJ: If it’s an FHA, VA or conventional loan, in most cases it’s six months after you purchase the home.
Is a refinance the same thing as a second mortgage
LJ: No. With refinancing, you pay off your current mortgage and acquire another first mortgage. In other words, you have a new first mortgage.
What is the difference between getting a second mortgage and reorganizing or refinancing your home?
LJ: A second mortgage is an additional mortgage that you place in your home and you still maintain your first mortgage. A second mortgage is obtained to take cash out of your home. In most cases, you will receive a higher interest rate on your second mortgage.
What is a really good HUD-certified, home counseling agency that you know of?
LJ: Marcia Griffin at HomeFree-USA. You may also contact HUD and they will give you a list of home counseling agencies in your area.
What is the average time it takes to close on a mortgage loan?
LJ: The average time is approximately 30 days.
How does a homeowner modify their payments?
LJ: If you are gainfully employed and making money, then a modification program is out there. The government has approved that. The problem is getting the information to the people. There are loan modifications through Ginnie Mae and Fannie Mae.
The homeowner must contact their lender and apply for a loan modification. If you’re having problems, you may contact USF and we will assist you with that modification process. Homeowners really don’t have to lose their homes. There again is the lack of knowledge. We’re not getting the information to the public.
How many cosigners or co-borrowers can you have on your loan?
LJ: You may have several borrowers in the home. However, it depends on the qualifications of each borrower/co-borrower.
Can you use a part-time income to apply for a mortgage loan?
LJ: Yes, you can use a part-time income so long as you have been working that part-time position for two years. And it doesn’t have to be the same part-time position. You just have to establish a track record that says you have actively worked part-time for two years and filed it on your income tax return.
So why is the homeownership crisis still lingering in the Black community?
LJ: The number one thing is lack of knowledge. But, it’s people of all backgrounds who have this lack of knowledge — not just African-Americans. I’m finding out a lot of this because I’m in a lot of states and I’m finding out that it’s more African-Americans who don’t own homes than it is other nationalities.
I’m available to all people. The problem with our people is that we often don’t have all the information we need. Yet, the lenders and the bankers they go to are more willing to give others what they need to help them. I watch this. When I started a career in mortgage banking, I saw so many minorities being turned down. And they have the same qualifications as Caucasians who didn’t get turned down.
Probably some of them got approved who should not have gotten approved, but it was because of the help that was given to them. They were told what to do. So, within the guidelines, we should provide our people the information that’s needed to acquire a loan and refer them to the right agencies that can help them.
Any final advice for obtaining a home?
LJ: Yes. Make sure you go to a well-experienced person. And even if they turn you down, go to another one. Go to housing counseling like HomeFree-USA, let them give you advice and get you prepared for home ownership because you’re going to run into obstacles. I wouldn’t be where I am today except for the grace of God and persistence. I kept going and going until I got what I was after. And I’m still pressing.