Surrounding yourself with trusted professionals who can help you have a smooth homebuying experience from start to finish is crucial, especially if you’re a first-time buyer and from a population that has faced housing industry biases and discrimination.
“In the decade since the end of the Great Recession, Black homeownership has continued to fall while every other demographic group has seen significant recovery,” Cy Richardson, senior vice president for economic programs for the National Urban League, told The Balance by phone. “The reasons for this crisis are compounded by multiple generations of explicit discrimination under federal law that had a direct impact in suppressing homeownership rates for people of color, as well as a lot of unique factors that first-generation homeowners face.”
This article, which is part of a first-time homebuyer series The Balance is publishing during Black History Month, will help all first-time homebuyers find representation in trustworthy real estate agents, appraisers, mortgage lenders, and insurance providers.
- It’s important to put together a trusted team of professionals when buying a home, especially for Black first-time homebuyers, who have historically faced discrimination and racism in the U.S. housing market.
- Choosing a trustworthy real estate agent, appraiser, and mortgage lender who will advocate for you can help the first-time homebuyer experience—and ultimately your transaction—go smoothly.
- You also should shop around for a trusted home insurance agent, and get educated about how appraisals work.
Whom You’ll Need To Work With When Buying a Home
In many cases, the homebuying team you put together will be your primary source of information throughout the journey. If you’re just starting out, there is a lot to get educated about, from how to make an offer, to what’s in the home contract, to the different types of home loans, and everything in between. As such, it’s crucial to have advocates in your corner.
“When buying a home, you’re making one of the biggest purchases in your lifetime and it’s important to surround yourself with folks who you know and trust to give you a good experience in making such a big financial decision that can not only just affect you, but also future generations,” Ashton Williams, Realtor at Elevation Group with Compass in Colorado, told The Balance by phone.
The most important team members are your real estate agent, appraiser, and your mortgage broker. But while you’re at it, it’s also smart to vet your home insurance agent and do your due diligence on the appraisal company as well.
Why Representation on Your Team Is Important
Consider this: The U.S. homeownership rate is 69.8% for non-Hispanic White Americans but only 42% for Black Americans, which translates to a homeownership gap of almost 30 percentage points. And not having the opportunity to build home equity contributes to the overall racial wealth gap, too.
Plus, lenders deny mortgages for Black applicants at a rate 80% higher than that of white applicants, according to data from the Home Mortgage Disclosure Act.
Discriminatory practices—everything from real estate agents who may steer you away from certain neighborhoods to lenders charging Black borrowers higher fees or rates to unfair appraisals in Black areas—are at least partly to blame for these disparities. That’s why it’s so important to have people in your corner to recognize the warning signs of potential biases, and to advocate for you.
“I think the laws definitely have changed over the years, but there is still a lot of foolishness that happens in the housing industry," said Matthew Garland, CEO of Garland Mortgage Group, during an Instagram Live interview with The Balance on Feb. 15, 2022. "I’ve been working in this industry for 20 years and I still see it first hand. There is still redlining going on, there are still appraisals going out that devalue Black assets.”
How To Find a Real Estate Agent or Broker
A real estate broker or agent is one of the most important members of your team, as they help you from the first day that you decide to shop for a home all the way through to closing. Their primary role is to take you out to see homes, but they also get you up to speed on the process, share their market knowledge, make recommendations and referrals to you for other homebuying team members, and more.
If you’re a Black homebuyer, look for someone who has experience working with other Black buyers, Deborah Spence, broker/owner of Fierce Realty Corp., just outside of Philadelphia, said in a phone interview with The Balance. “The best thing is to work with someone who’s familiar with the challenges that African-Americans face when trying to find a home. It may be someone who’s a Realtor who fights for homeownership for Black families, or they may sell in areas that are predominately Black,” she said.
It also doesn’t necessarily have to be a Black real estate agent, she pointed out. “What matters is how they feel about Black homeownership and if they are knowledgeable about it,” Spence said.
If you’re wondering how to find a real estate agent who is Black, one key resource to help you is NAREB, the National Association of Real Estate Brokers. The organization, to which both Spence and Williams belong, was founded in the 1940s by Black real estate professionals who, at that time, were denied access to membership in the National Association of Realtors (NAR).
Another online resource to try is the Black Realtor Directory.
Questions To Ask Real Estate Agents
- Do you have specific knowledge of the area I’m interested in?
- Do you have any past clients I can speak with, or testimonials to share?
- How do you advocate for clients? Give me an example.
- Have you worked with a lot of first-time homebuyers? What about Black homebuyers?
Discrimination Red Flag
One of the biggest warning signs that your real estate agent is not acting in your best interest is if they give you a list of homes to view in areas you did not request, such as high-crime or predominantly Black neighborhoods, Spence said. Or if they refuse to take you to homes in certain neighborhoods.
Another red flag is if the agent makes assumptions about what type of loan you may or may not qualify for, Spence said.
While this type of discrimination in generally hard to prove, Williams said that it’s important to listen to your gut feelings. “Systemic things like redlining or steering aren’t going to be so overt. You may not know it’s even happening,” he said.
How To Find a Mortgage Lender
A mortgage lender is an essential player in your homebuying process because they will be providing you with the funding you need to make this big purchase. Since the Fair Housing Act (FHA) was signed into law in 1968, it’s been illegal to discriminate because of race, color, national origin, religion, sex, and some other factors. Yet, more subtle discrimination may still be happening among some mortgage lenders, who might use more stringent standards for Black homebuyers or charge higher fees or interest for homes in predominantly Black neighborhoods.
Fannie Mae research found that Black low-income first-time homebuyers on average paid higher closing costs relative to purchase price than did White or Asian buyers with loans acquired by the government-sponsored enterprise (GSE).
To find a trustworthy lender, shop around and interview a few potential lenders to find one with whom you feel most comfortable. Williams recommended speaking with someone at a local community bank or credit union. “They’re going to have the most up-to-date knowledge on that particular market,” he said.
You can also ask your real estate agent for recommendations because they usually have a go-to list of mortgage professionals with whom they’ve cooperated before.
“Speak to family, speak to friends," Garland said. "Find someone who has gone through the home buying process. That way you know how this person works already as a professional. So many times people go like ‘Well I already bank with X, Y, or Z, I’ll just go get a loan from them.’ No. That might not always be the best choice for you.”
In addition, you could aim to work with a minority-owned financial institution, such as a Black-owned bank. You could also ask prospective brokers if they are a member of the National Association of Minority Mortgage Bankers of America (NAMMBA). “Having folks that advocate for you makes a difference in a competitive market,” Williams said.
Questions To Ask Mortgage Lenders
- Can I contact you with questions any time?
- Can you give me an estimate of closing costs?
- Do you work with a lot of first-time buyers?
- Can you go over all of my loan options?
- What’s the typical time till closing?
- How will you advocate for me to make sure the process moves along?
Discrimination Red Flag
Lending discrimination is another tricky thing that’s difficult to prove because there are many factors that go into application decisions, including credit history, income, and debt levels. Some clear red flags are mortgage application questions about educational history, race, ethnicity, religion, disability, sexuality, or family status—all of which are violations of the Fair Housing Act. If you are asked to provide such information, document the request and push back, or find a new lender.
Discriminatory practices may go beyond the data. Be on the lookout for any implications or assumptions made when you have your first meeting, or if you feel like more documentation is being asked of you than other buyers you’ve spoken with.
"At any step in the process, any and every question you have should be answered to your satisfaction,” Williams said. “If you don’t feel comfortable at any point, that’s a red flag for you.”
Other signs to watch for include if the lender isn’t willing to provide guidance on different loan qualifications, if they assume you can only qualify for one type of loan, or if they tell you you’re not ready to buy (despite you having done your own research on the minimum requirements), Spence said.
How To Find a Home Appraiser
The home appraisal is a necessary but stressful part of the homebuying process. The way it works is that the lender brings in an independent third party to assess the value of the home to make sure it’s priced properly.
Buyers can’t pick their appraiser per the Fannie Mae-Freddie Mac Appraiser Independence Regulations enacted in 2011, but you can certainly do some research on the appraisal company online, and get your real estate agent’s take on the company’s reputation.
“There's been some above-the-fold stories in major publications around whitewashing and discrimination and bias in the appraisal industry, which is an industry that has not been fully diversified, and not been fully democratized,” Richardson, of the National Urban League, said.
In fact, research has found that comparable homes with similar amenities are worth 23% less in majority Black neighborhoods when compared with homes located in areas with few or no Black residents.
Because the process is subjective and the analysis of a home’s value relies on a variety of data points, it’s difficult to prove blatant discrimination, even though studies have proven that racial bias in the appraisal industry is still an ongoing issue.
Spence has had firsthand challenges getting some of her Black sellers’ homes appraised appropriately. “It’s so bad in some cases to the point that I have White actors stand in for sellers at appraisal appointments,” she said.
Questions To Ask Home Appraisers
Though a buyer can’t pick their appraiser, they could call a few to ask some general questions to gauge if they are getting a fair assessment of the property. These queries include:
- As an appraiser, are you familiar with the area/neighborhood?
- Have you done recent appraisals in this area?
Discrimination Red Flag
Because your real estate agent has access to comparable-home sales data in the area, they will be able to recognize if the appraisal comes in unusually low—another reason why hiring a savvy real estate agent is so important. If you feel that a home you’re looking to buy has been undervalued, you should push back by asking for a second appraisal. This may cost you more out of pocket, however.
If you feel racism and bias were reasons for a low appraisal, you should consider filing a complaint with HUD’s Fair Housing and Equal Opportunity office or the Appraisal Subcommittee Appraisal Complaint National Hotline provided by the Federal Financial Institutions Examination Council (FFIEC).
How To Find an Insurance Agent
To purchase a home with a mortgage, you will have to purchase a homeowner’s insurance policy. You will need to provide the policy’s binder before you go to closing. Finding a reputable home insurance agent to guide you toward the right policy and coverage is another important step in the overall buying process.
Homebuyers should research and interview to find a trustworthy insurance agent or broker for their new home, especially since you'll likely have a working relationship with them for many years.
Questions To Ask Insurance Agents
- If necessary, what is the process for filing a claim, and how will you help?
- Can you break down my coverage options and help me decide on what I need?
- Do you specialize in a particular type of coverage I may need (e.g., hurricane or flood insurance)?
- How much experience do you have working with first-time buyers?
- Do you offer product bundles like auto and other insurances?
Discrimination Red Flag
Unfortunately, risk-based policy writing may lead to higher insurance costs for Black homeowners, or for buyers in predominantly Black neighborhoods. It’s another form of redlining, and like the other types, it can be difficult to prove.
If you’re a first-time buyer who is unfamiliar with what a home insurance policy should cost, it is critical to do some homework when reviewing a policy quote. Ask close friends and family about their policies, and seek referrals for insurance agents they trust.
The best way to ensure you’re getting a fair quote, though, is to shop around, Williams said. “Get at least two or three quotes, and know what value you’re actually being provided.”
Although the fight against racial discrimination in the housing industry persists, the good news is that today’s first-time homebuyers homebuyers have many resources available to help them navigate the system, including more diverse agents and brokers to work with than in past generations.
If you start your journey by carefully selecting the right team of people who can help advocate for you, that will help ensure that the process goes fairly and smoothly, right up until the day you’re handed the keys to your new home.