Financial Wake-Up Call - Page 3 of 5

Financial Wake-Up Call

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One of the bright spots in this economy remains the historically low interest rates — something too few African Americans are taking advantage of. But David Cleveland is not one of them.

Cleveland, 25, achieved his dream of homeownership while overcoming several obstacles, some of them psychological. Working as a communications officer and dispatcher for the security police at St. John’s Hospital in Detroit, Cleveland was able to parlay an annual salary of $23,000, and help from mortgage assistance programs, to buy a house.

Prior to becoming a homeowner, Cleveland, the sole breadwinner in his family, rented a two-bedroom apartment for $700 a month. But instead of looking for a larger rental to accommodate his wife, Ojhair, and their two daughters — Gabrielle, 4, and Destiny, 2 — Cleveland decided to invest in a home.

“I didn’t know I could buy a home at my age,” he says.

But when his older brother, Derrell, a computer repair technician, bought a house in 2001, it motivated Cleveland to try. He found a real estate agent, applied for a bank loan, and was quickly pre-approved, given his good credit standing. Cleveland also found that he was eligible for two $2,500 grants from Bank One and Shore Bank Mortgage. His out-of-pocket down payment and closing costs amounted to a mere $1,300.

On March 29, 2002, Cleveland and his family moved into their $85,000 three-bedroom brick bungalow. Now, Cleveland makes a monthly mortgage payment that’s just $80 more than what he paid in rent.

“I feel good every time I pay my mortgage because I know I’m investing my money,” he says.

Cleveland says he now has the confidence to look ahead to real estate investment. “I’m not going to stop here, I’m going to keep this home as an investment and eventually move up to some
thing bigger.” Currently, homeownership among African Americans is 47%, while for Caucasians it stands at 74%. These figures, which include African Americans in upper-income brackets, show a disturbing disparity because for most Americans, their home is the primary determinant of their net worth.

In order to take the first step to owning a home, many African Americans, like Cleveland, must overcome the psychological obstacles to homeownership. “For many of our people, especially the middle-class, there is a historical memory of discrimination, risk, and stories passed down of people being cheated in a house sale,” says Gordon Nembhard.

But there are also real barriers that blacks face when buying a home, such as accumulating a down payment while inundated with debt.

“Blacks come out of college or graduate school with large loans, and that has [negative] implications for credit and when they [can] begin saving for a down payment,” says Anderson. On the other hand, Caucasian home buyers can come up with the cash through parents, in-laws, or trust funds.

However, changes over the last two decades — such as greater access to private subsidies, grant programs, and FHA and VA loans — have made these barriers a bit easier to hurdle. Those changes, coupled with the Community Reinvestment