Before You Buy: What Black First-Time Homeowners Must Know About Property Taxes and Escrow

The American dream of homeownership is slipping away from many, especially Black millennials. Skyrocketing mortgage payments, hidden tax hikes, and a lack of financial transparency have turned what was once a symbol of stability into a potential trap. But while the housing crisis is affecting people across the board, its impact on Black communities is uniquely layered due to historic systemic inequalities in wealth-building, redlining, and discriminatory lending practices.

So what’s really going on? And how can Black millennials protect ourselves, build wealth, and not fall victim to this system?

The Real Cost of “Fixed” Mortgages

Many first-time homeowners are sold on the idea of a “fixed mortgage.” But what’s often left out of that conversation is how property taxes, insurance, and escrow mismanagement can cause monthly payments to balloon by hundreds—or even thousands—of—dollars overnight.

A Black woman shared how her mortgage payment skyrocketed from $1,907 to $3,450 in just one year. The reason? Her property taxes spiked after the entire home, not just the land, was reassessed. Her lender never explained this clearly, and her real estate agent certainly didn’t break it down. She was left blindsided, and not alone—many Black homeowners report similar experiences.

Why It Hits Us Harder

According to the Urban Institute, the Black homeownership rate in 2023 was around 44.1%, significantly lower than the national average of 65.9%. That gap is even more pronounced among millennials, where income inequality and student loan debt already create a shaky financial foundation.

Historically, Black homeowners have been steered into unfavourable mortgage terms and underserved by real estate professionals. This lack of transparency, especially around escrow, tax reassessment, and insurance adjustments, becomes a landmine for new buyers.

Escrow 101: What You Need to Know

Escrow is a part of your monthly mortgage that covers property taxes and homeowners’ insurance. Every year, your lender reassesses whether enough has been collected. If not, your mortgage increases to make up the difference. If your taxes and insurance spike, which is happening across the country, you might see massive jumps in your monthly bill.

But here’s the kicker: even if you were overpaying before, your escrow refund can be wiped out by sudden property tax hikes and insurance premiums. And if your home was newly built? Expect a steep tax jump once it’s reassessed, not just based on the land, but the home’s total value.

How We Build Smarter, Not Harder

We need to shift from merely seeking homeownership to understanding wealth literacy. Here are the key moves:

1. Ask about property tax reassessments when buying new construction.
2. Get an escrow audit before signing—demand transparency.
3. Don’t buy a solo if your finances are tight. A dual income can offer a cushion.
4. Shop for insurance aggressively, and know it can fluctuate yearly.
5. Invest in financial literacy. Knowing how taxes, escrow, and insurance work is power.