Program pays off up to $50K in debt to help Blacks qualify for Habitat for Humanity homes

Blacks in the state of Washington may now qualify for Habitat for Humanity homes, thanks to an innovative program in the Seattle region that will erase up to $50,000 of debt.

The new initiative by Habitat for Humanity Seattle-King & Kittitas Counties intends to assist individuals in eliminating or drastically reducing past debts that may impede their ability to obtain a mortgage, The Seattle Times reported.

The new initiative will be available only to buyers who meet Habitat’s requirements and complete home purchases through the organization. It serves people who earn less than 80 percent of the King County median family income, which is approximately $85,800 for a household of three.

Jung Hyun Choi, a senior research associate at Urban Institute who has studied the home buying disparity, said the Habitat for Humanity initiative is the proper approach to minimize the gap between White and Black homeownership rates and assist people in repaying their debts.

“Debt-to-income ratio is one of the key reasons Black households are denied [mortgages],” said Choi, according to The Times.

A LendingTree analysis revealed that White home purchasers are more likely to receive mortgage approvals than Black buyers. According to the Employee Benefit Research Institute, White households nationwide have less debt related to their assets and income than Black and Hispanic families.

According to Evergreen State census data from 2019, 31 percent of Black households there own their homes, and about 68 percent of White households do, The Times reports, citing “past and present discrimination and economic inequality as a cause.”

Habitat for Humanity will consider an applicant’s source of debt when selecting participants for the new program, which is targeting Blacks, but is open to all who qualify. Ali Sheibani, Habitat’s director of homeowner services, said buyers could have problems ranging from student loans to medical expenses, unpaid child support or the effects of identity theft.

Sheibani said after the purchaser has done half of their “sweat equity” — in which they carry out building or other work for Habitat and start working with a budgeting counselor — the organization will pay off up to $50,000 of debt.

Homesight, a nonprofit lender and developer, will assist in referring buyers to the program.

Habitat anticipates that five to 10 households will obtain debt remediation this year, thanks to a $250,000 grant for its initial pilot effort. Although some lending initiatives assist tenants in repaying debt, Sheibani asserted that the new program could be the first of its sort.

“You can have all the down-payment assistance in the world,” said Sheibani, The Times reported, “but if you can’t qualify because your debt is so high … you’re just not going to be able to buy a home.”

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