Latinos will be top homebuyers in the next two years; what you can do to avoid home ownership pitfalls

For a growing number of Latinos, the American Dream has burgeoned into something their parents could only imagine.

The Pew Research Center projects Hispanics will account for about 24 percent of the U.S. population by 2065, many with ancestral roots that will have dated back nearly a century by then. Goals don't change much over time - financial stability, career advancement, and home ownership are always near the top - but how one gets there, specifically in buying a home, does appear to change.

A study conducted by TD Bank last September found Latinos are the fastest-growing demographic among new homeowners. The largest barriers first-time buyers face predominately fall into one of three categories: subpar credit, student loans, or little to no savings. Regardless, Latinos will be nine percent more likely than the general market to purchase over the next two years and they're willing to do it at a higher price.

Their reasoning is simple enough; an estimated monthly mortgage outweighs the benefits of pay for ever-rising rental costs. While it often means moving to urban areas with affordable homes and uncongested school systems, it can also be seen as a long-term investment that generates tax breaks and gives owners a set payment for the next 30 years.

"Families do whatever it is they have to do to make the dream possible and acquire their first home," said Cain German, a realtor with RE/MAX Prestige. "Their workplace may be in Orange County, but they will have zero opposition to move into surrounding counties and sit in traffic, making the commute to work in order make ends meet for their family. They're ecstatic to have a roof for their family to call their own." 

According to a recent study from The Demand Institute, a non-profit think tank focused on understanding how consumer demand works, less than 40 percent of Latinos can afford to own a home. The remaining 2.5 million aspiring homeowners will struggle to reach their goal in the next five years.

On par with TD Bank's study, the latter study suggests Latinos will account for four of 10 new owners between now and 2020.

"Hispanics were hit especially hard by the financial crisis and housing crash, and the outlook for home ownership is uncertain," Louise Keely, president of The Demand Institute, said in a press release. "Still, Hispanics are a large and fast growing segment of the housing market, and their distinct demand for communities and housing could stimulate innovation for a wide range of businesses, including financial services."

Latinos are stuck between saving for the future and battling rising rent costs. Bad credit, or no credit at all, makes this portion of their American Dream little more than a pipe dream. And while many would give up here, others will look to the numerous government-driven home assistance programs, some requiring as little as 3.5 percent of the purchase price down.

The Federal Housing Administration insures low interest loans granted to qualified homebuyers. There are limits to FHA loans, but they usually cover the average price of U.S. homes. Veterans can apply for long-term, zero interest, low or now down payment loans offered by the Department of Veteran Affairs if the meet certain requirements.

Each state offers their own set of home-buying programs, though each state offers different amounts with varying levels of assistance. As German puts it, the best first step is in sitting with a realtor or lender and going through the various options.

Here, one goes through finding the perfect loan, the perfect home, and any unforeseen expenses that can make or break a deal. Played right, it could be the beginning of a great investment.

"What you buy today may appreciate $60,000 in one to two years, especially in a growing or progressing city," German said. "Imagine pocketing $60,000 for living in your own home. You can't do that with a savings account or a CD which pay minimally."

"Don't forget about equity. The amount you pay off is yours to take home at the end of the day."