By Melissa Murray
In the late 1990s, I found myself in a precarious position. I was a middle-income, divorced single mother who purchased her first home. It should have been a time for celebration; after all, I had achieved the American dream amid a challenging time. But instead, it was a period of hardship.
I rented a space in a family member’s basement during my divorce. Living in cramped quarters was not ideal, so I started looking for an apartment. While searching, I was drawn to newly built homes in my area. I loved the prospect of having a house, but I wasn’t sure I could afford one. But, at the suggestion of my ex-husband, I met his realtor and went shopping for a house for my little girl to grow up in. Within six months, my circumstances changed tremendously—I had achieved a major milestone and purchased a newly built, three-level, three-bedroom townhouse.
While I was excited, I was also a little overwhelmed. I distinctly remember all the confusing paperwork I had to complete. I didn’t have the best credit score and had very little money saved for closing. The builder’s lender suggested I get gift money from a family member or friend for closing and mentioned that I would be eligible for an adjustable-rate mortgage with private mortgage insurance. He explained that my interest rate would vary and either go up or down after a year or so. I nodded, signed the papers and just focused on the fact that my daughter and I would have our own home. No more renting basements for us.
I was happy, but one major issue proved problematic: I didn’t understand the terms of my loan. I did not realize that rate changes would affect my mortgage payments. Two years later, the rate increased, which increased my mortgage payment by $500. However, my income was insufficient to meet my new loan payment. I did my best to address the situation, but balancing the new mortgage payment, the HOA fees, homeowner’s insurance, utilities and meeting everyday needs was a struggle. Eventually, in the summer of 2001, I went into foreclosure and lost my house. It was a grueling experience. I felt embarrassed and disappointed that I failed to keep a house for my little girl.
While this was my story, it’s not a unique one. Multitudes of people are living my story today. Many Americans are financially unprepared to purchase a house, are unfamiliar with the mortgage loan process and are unable to sustain homeownership. But this doesn’t have to be the case. We can improve the journey for others through homeownership education. Experts recommend expanding homeownership education as an effective solution to help consumers purchase homes and avoid foreclosure.
I learned from my experience and am a proud homeowner again living the American dream. But I had to overcome some challenges to get where I am today. So, I want to make it easier for others. Drawing on my past, I’ve created the ABA Foundation’s Unlocking Homeownership campaign, which includes a toolkit to mobilize and empower banks to help low-to-moderate-income consumers purchase—and keep—their homes. The toolkit aims to boost bank-led efforts to educate consumers on the home-buying process, increase education for current homeowners on retaining their homes, and promote effective partnerships to unlock sustainable homeownership for people of all backgrounds.
Through this new resource, I hope to help those who could benefit from it, especially my daughter, as she is about to begin her homeownership journey.
Melissa Murray is director of bank community engagement at the ABA Foundation.
