Employers, embrace homebuyer education

Employers benefit when workers understand the pros and cons of new products coming on the market in response to high home prices and borrowing costs, like the return of the zero-down-payment mortgage.

June marks National Homeownership Month, a timely reminder of the pivotal role homeownership plays in the financial health of your workers.

How pivotal?

Homeownership continues to be the primary wealth building asset for the majority of U.S. households.

But it’s brutal out there, making the dream of homeownership feel out of reach for (checks notes) everyone who’s not independently wealthy, low- and moderate-income workers, especially.

A couple of recent headlines sum up our state of affairs:

“Cost of buying a home in America reaches a new high;”

“A shady financial tool from the housing-bubble era is making a comeback.”

Why does this matter to you as an employer?

Employers, housing costs, and financial health

Employers understand, generally, financial health is determined in large respects by housing affordability.

Housing expenses constitute the most significant outlay for most employees, often consuming 30–40%, or even more, of a household’s budget.

This burden contributes to financial stress, the leading stressor among U.S. workers, which is the death knell of worker well-being and productivity.

By being a resource for your employees in their quest for homeownership — which 84% of respondents to a recent Lending Tree survey said is still part of their American dream — you can strengthen your organization and the financial health of your workers.

Reduced stress due to enhanced stability, predictability of costs, long-term affordability and asset building, enabled by homeownership, are powerful, positive outcomes for your workforce.

They show up in your bottom line and social impact.

But when the home purchase market is effectively inaccessible to a majority of workers due to high home prices and high prices to borrow, financial products pop up to meet the need, like the zero-money-down mortgage.

You and your workers will benefit by making sure your employees understand both the pros and cons of products that sound too good to be true.

Risks of zero-down loans to financial health

Are zero-down home loans a threat to the financial health of your workers?

Last month, United Wholesale Mortgage, among the nation’s largest mortgage lenders, introduced a new product that allows first-time homebuyers to secure their purchase with no money down.

Sounds amazing, right?!

UWM’s product includes borrowing 3% of the home’s value as an interest-free loan, up to $15,000, while the remaining 97% is covered by a standard mortgage.

The up to $15,000 interest-free loan must be repaid upon sale, mortgage payoff or refinance.

If nothing bad ever happens to your workers or to the economy, and the values of their homes keep going up, then the UWM product is a worthwhile option for your workers to explore.

The problem is that the economy is a volatile beast, as are your workers’ lives, because of our broken system of jobs and benefits that leave most of them scrambling paycheck to paycheck.

Odds are that many of them will have income interruptions, or need to move, or experience local, if not national, housing price drops.

If or when that happens, then your workers will be trapped with an anchor of debt and potentially a default on their credit report which can take years to remedy.

The impact on their financial health: catastrophic.

UWM disputes these concerns:

“People who make these claims are uneducated about the current state of the industry,” Alex Elezaj, UWM’s chief strategy officer, told CNN. “In today’s environment, UWM is responsible for underwriting the loan, which gives us confidence that these are high quality loans.”

Maybe so. As long as borrowers understand fully what they’re signing up for then that’s great!

But if there’s one lesson that we learned as a country during the Great Recession and early days of the COVID pandemic, it’s that lower-income people are likely to suffer most in an economic downturn.

“One of the lessons of the subprime crisis,” said Jonathan Adams of Saint Joseph’s University, “was that you are not doing any favors to borrowers by making it too easy to borrow.”

Implementing Employee Housing Assistance Programs

Employers are uniquely positioned to help workers to purchase a home through Employee Housing Assistance Programs (EHAPs).

EHAPs can encompass homeowner education, credit counseling, down payment assistance, and more.

But more importantly, especially for HR for small businesses where EHAPs may be out of the question any time soon, even modest initiatives such as sharing resources like expert home-buying tips from TrustPlus personal financial coaches (cough), can signal your commitment to your employees’ financial well-being.

Or like making sure your workers understand the nuances of a product that could ruin them financially, for years.

Personal financial coaching strengthens financial health, now and later

Personal financial coaching from TrustPlus is one of the most effective ways to ensure that your employees are savvy about their options. And about managing debt, strengthening credit, and building savings, in general.

This National Homeownership Month, embrace homebuyer education in combination with your overall focus on your employees’ financial health.

You’ll be addressing your workers’ biggest stressor and poised to reap the talent, productivity, and profit gains of a financially healthy workforce.

Schedule time with TrustPlus to discuss capturing the benefits of a financially healthy workforce for your organization and workers.