Mortgage lenders must look beyond W-2s, open pathways for those without them

Ngoc-Tran Vu

I knew Boston was a tough town to buy a place to live when I started looking. The average prices for condos and single-family homes are between $500,000 to almost $1 million, a rate that has more than doubled from when I left Dorchester for college in 2006.

It’s hard to save enough for a down payment, at least not without a lot of help from family. But the current market is particularly hard for American millennials, aged 23 to 38 these days. And a lot harder for people of color – especially those who identify as Black and Latinx.

After finishing graduate school, I moved back in with my parents in Dorchester, my home community, to keep my expenses low and allow me to save more. I am a working artist, but I also have a day job to make sure I have a regular income.

When I decided to start the home-buying process, I had a credit score of 783 and enough money saved to put 10 percent down on a place in my price range. Plus, I could afford the extra incurred costs like insurance and fees. I was pre-approved for a loan.

Still, it took me six months, more than a dozen bids, and two loans pulled from approval at the last minute. One loan was through a first-time home buyers program that initially miscalculated my income – it turned out I made slightly over the required income to qualify for it at the time – and the other claimed to be uncomfortable about my “work history being an artist and community activist.”

Rebecca Steele, CEO of the National Foundation for Credit Counseling, concurs that my experience reflects a more challenging market for millennials in the traditional banking system than was the case with our predecessors. We stay single longer. More of us have student debt and are self-employed as freelancers and members of the growing gig economy.

Most banks prefer buyers with traditional W2 salaries because they show a more stable income stream than those who are self-employed or freelancers who may have fluctuating incomes. There are Fannie Mae and Freddie Mac guidelines that recommend taking a two-year work history or an average of Schedule C income for loan applicants who are self-employed, but, Steele says, the two-year measure is challenging for freelancers because their pay can be irregular. As an artist, I go through periods of time where I do not receive the commissions or grants I am hoping for. In addition, some clients haven’t paid me on time.

Steele recommends that lenders adapt to the changing workforce by creating more expansive guidelines to support those who have 1099-MISC incomes or those who have multiple income streams. She also advocates for families and young people to start building credit and utilizing financial best practices early on to prepare for eventual homeownership.

The city of Boston could help, too. I went through the city’s first-time homebuyer course, and while it was helpful, it lacked curriculum and resources for self-employed and freelance workers. The city runs Metrolist, which shares housing resources and has some programs in place to help with affordable housing – a first-time homebuyer mortgage, down payment support, and affordable condo lotteries. These programs are extremely competitive and often do not reach historically disadvantaged communities whose residents speak different languages.

I’d like to see the city create specific policies and add incentives for financial institutions to encourage homeownership among millennials, especially artists and cultural workers. Perhaps designate more housing and workshops specifically for artists, lessen the requirements for stable income documentation, and provide grants plus interest-free insurance to support freelancers with down payments.

And city government needs to stay vigilant about discrimination. A major investigative report found that in many cities, lenders still discriminate against people based on their skin color, their marital status, occupation, or zip codes. Boston was not on that list of cities, but only because of lack of data. As a young Vietnamese American woman, I worried that the mortgage process might be stacked against me. I did beat the odds and, fortunately, I was able to get my loan approval in the end.

Boston’s future will be more and more diverse and homeownership should be accessible for young people and those who do not fit the archaic model profile of what lenders consider desirable. In fact, if things don’t change, homes in the future will be predominantly owned by large companies, white families, or those with immense generational wealth.

Financial institutions and home loan providers need to start adjusting to changing demographics. Why shouldn’t preference be given to local homebuyers who want to remain in their communities? This would help reduce the gentrification and displacement that is rapidly taking place in Boston and beyond.

I am a proud homeowner now in the neighborhood where I grew up and where I want to remain. This would not have happened if I hadn’t been able to push back against a system that was not properly set up to support people like me, even as I had meticulously tried to prepare myself for success.

I can’t help but think about the many others who have been denied the opportunity of homeownership, especially those who are committed to meaningful, long-term contributions to their home community beyond personal financial stability and profit.

To learn more about this issue, register for “Navigating Housing & Studio Spaces for Artists: Know Your Rights and Resources” with Ngoc-Tran Vu and Liliana Mangiafic with Assets for Artists next month, on Dec. 2.

This article was first published on the website artsboston.org.