Tailoring the sales process for the Hispanic homebuyer

Multigenerational living—defined as at least two adult generations or grandparents and grandchildren younger than 25 living under one roof—is a trend on the rise in America. Over 64 million people in the U.S.—approximately one in five individuals—live in households comprised, typically, of parents, children and grandparents. Once upon a time, getting one’s own place was a symbol of independence, a milestone of adulthood; not so much anymore. Increasingly, American families are choosing multigenerational living arrangements. And the phenomenon is especially prevalent in the Hispanic-American community.

Considering that over the last decade Hispanics have posted the largest share of population growth in the U.S., and that trend is expected to continue, what are the implications for lenders, builders, realtors and everyone connected to the housing ecosystem? It’s time to adopt business practices beyond those that were built around the nuclear family.

A Strong Sense of Family

Between 1950 and 1970, the U.S. population grew by more than 50 million. During this period, the number of multigenerational households declined from 32.2 million to 25.8 million, reflecting the postwar development of the suburbs and a booming economy that enabled middle class families to own a home—and an automobile for visiting relatives who no longer shared the same living space.

Fast forward to 2018 and the trend has reversed. While 20 percent of the U.S. population lives in multigenerational households, the percentage is even higher for Hispanic families (27 percent).

This cohort is poised to have a profound effect on real estate development, home financing and the overall housing market.

“Homeownership has always been a central pillar of Hispanic identity as it relates to economic prosperity,” says Scott Astrada, director of federal advocacy at the Center for Responsible Lending.

Marisa Calderon, executive director of the National Association of Hispanic Real Estate Professionals (NAHREP), agrees, noting that Hispanic communities see homeownership as a key part of long-term stability for their families. “What’s encouraging to me about the Hispanic community is that ... the enthusiasm for homeownership never waned,” she says, referring to the aftermath of the housing crisis of over a decade ago.

“20 percent of the U.S. population is living in multigenerational households”

Calderon also notes that Hispanic communities tend to have a strong sense of family, which plays out when several generations live together. It is not uncommon for homebuyers to pool monies as gifts from family members to purchase a home. One study found that Hispanics are 74 percent more likely to be persuaded on product purchases by their children compared to non-Hispanics. “Understanding that homebuying may be experienced as a multigenerational process is an important element for mortgage professionals working in the community,” Calderon says.

Here are some facts about buyers of multigenerational homes in 2017, according to the National Association of Realtors: Their median age was 53, median income was $91,000 and 30 percent were first-time home buyers.

Think Local, National and International

But be careful not to paint the community with a broad brush. “I’m from Texas, home to a large Mexican- American population,” says Danny Gardner, senior vice president of Single-Family Affordable Lending & Access to Credit at Freddie Mac. “As I’ve moved to the middle Atlantic, I’ve found that most people of Hispanic origin tend to be from El Salvador. In other parts of the country, such as south Florida, I might find more Cuban and Caribbean Hispanics. Be sure to understand your local market because not all communities are the same.”

The Little Differences

Every transaction can be a little different. In addition to agents potentially needing to help a family find a multigenerational home, lenders might have to account for multiple income sources paying for a home. As the gig economy has become more prevalent for millennials and even baby boomers, members of this new diverse group of homeowners don’t always have just one W-2 form to show their lender. So, there might be income from several people to pay for the home, which could be generated through the gig economy, an entrepreneurial venture or traditional employment. Lenders who are comfortable assessing income from multiple sources will better serve all homebuyers of the future.

Freddie Mac’s Gardner agrees, adding that lenders should think about potential barriers in their origination platform, whether it be something as broad as clearly communicating lending guidelines to consumers or something as simple as modifying the number of signature lines available on loan applications or mortgage note and deed.

“When you think about the growing consumer demographic and the fact that it’s in large part non-white, the mortgage banking population is not necessarily representative of the buyer of today and tomorrow,” Calderon says. “The industry as a whole—both real estate and mortgage banking—should seek to employ more people from a younger demographic, whether they’re millennials or the incoming Generation Z, who have language skills that would be helpful to borrowers.”

Possessing cultural competencies is critical to “understand the nuances associated with people living their lives, to be able to better service them and to show you understand how they do their business—and that you welcome it, as opposed to merely accommodate it,” Calderon says. “There’s a difference.”.

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Also helpful: Filling the education gap.

For example, on average, non-white families have substantially less wealth than white families. “But from a homeownership perspective,” Calderon says, “what’s largely misunderstood, not just by Hispanics but by the population in general, is that you don’t need to have a 20 percent down payment to purchase a home. You can purchase a home with 3.5 percent or 5 percent down or with different kinds of assistance, depending on your income.”

Housing professionals can do a better job helping Hispanics and other interested first-time buyers understand their options with outreach. Community banks and credit unions that have homeownership programs that take consumers through the homebuying process from the very beginning to the very end are especially helpful, notes Astrada.

“They actively go out into the community and offer workshops and professional development opportunities—proactive steps that any lender can make, not only to drive homeownership but also to cultivate positive relationships with the Hispanic community and long-term customers.”

How Freddie Mac Can Help

There are a host of products and resources in the marketplace for lenders to help serve consumers, but now may be the time to step out of comfort zones. “We find that people tend to have one go-to product—and try to find consumers that fit into that box,” says Danny Gardner, senior vice president of Single-Family Affordable Lending & Access to Credit at Freddie Mac. But there are other resources lenders may want to consider, including:

  • Home Possible® Mortgage, which provide lenders with low down payment options—as low as 3% down for qualified borrowers.
  • Loan Product Advisor®, Freddie Mac’s automated underwriting service that offers automated assessments for borrowers who do not have a credit score.
  • A partnership with LoanBeam, which helps lenders reach more self-employed borrowers.
  • MyHome by Freddie Mac®, a consumer-focused resource center featuring tools, resources, and information on renting, purchasing and owning a home.

“At MyHome you can find CreditSmart®, an award-winning financial literacy program designed to meet the needs of a diverse set of consumers,” Gardner says. Developed in partnership with civil rights organizations, diverse and inclusive real estate organizations, leading experts on homebuyer education, HUD-approved counseling organizations and the like, CreditSmart is a free, web-based tutorial available in both English and Spanish.

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