Mortgage affordability calculators will never be the same thanks to a revolutionary new resource developed by the National Housing Conference (NHC) and the Black Homeownership Collaborative, as NHC’s Senior Policy Director Charles Lowery, Jr., reported last week. The game-changing 3by30 Mortgage Calculator, accessible at www.3by30.org, allows any interested homebuyer to assess how much of a mortgage they can afford without ever having to guess how big a down payment they will need. One of the biggest obstacles to becoming a homeowner is the lack of understanding surrounding down payment requirements. However, the 3by30 Mortgage Calculator successfully addresses this issue by completely eliminating the need for guesswork.
In this note, I’m going to explain how this incredible tool works, but first, let’s look at why it is so important. According to a survey by Clearpath Strategies and USMI, 46% of African Americans identified the lack of intergenerational wealth for a down payment as a significant barrier to homeownership. When asked “based on what you know, what is the minimum down payment required to qualify for a mortgage,” 42% of African Americans said it was more than 20% and 21% said they did not know. The numbers aren’t a lot better for others. Only 18% of Whites and 14% of Hispanics correctly said that the down payment required was 5% or less, compared to 14% of African Americans. Clearly, everyone has significant misconceptions about down payments.
The 3by30 Mortgage Calculator never asks how much you need to put down, it tells you. You start by entering your gross annual income, monthly debts, and the amount you have saved for a down payment. Then, using the Down Payment Resource® website, you can identify available down payment assistance (DPA) in your community. In Washington, D.C. alone, there are 15 programs that provide at least $9,000 in DPA. For low-income D.C. residents, the assistance can exceed $100,000. The 3by30 Mortgage Calculator also allows you to estimate your mortgage interest rate, credit score, property taxes, homeowners insurance, and mortgage insurance. ®
Using the 3by30 Mortgage Calculator, a family with a combined income of $120,000, $25,000 in savings for a down payment, and $9,000 in DPA, can afford a $361,000 home with a monthly payment of $2,998 – less than they may already be paying in rent. The required down payment will be less than 5%, specifically $16,842, and there will be additional closing costs of $17,158. This differentiation between down payment and closing costs is a common stumbling block for first-time homebuyers who may be unaware that closing costs can exceed the down payment itself.
Every factor in the calculation can be easily adjusted, resulting in instant updates to results. This includes essential indicators of affordability such as the housing debt-to-income ratio and the total debt-to-income ratio. Interest rate assumptions can also be easily adjusted. By default, the 3by30 Mortgage Calculator uses a 7% interest rate, but if rates go down to 5%, the monthly payment in the example above would reduce by over $400. We will update the default as mortgage interest rates change in the future.
I encourage you to explore and utilize the 3by30 Mortgage Calculator by visiting www.3by30.org/mortgage-calculator. Afterward, I encourage you to share your experience on social media or with your friends and colleagues. Working together, we can help close the homeownership gap and make the American Dream of homeownership a reality for over 3 million of our friends and neighbors by 2030.