An argument for a 40-year mortgage.

• Millions of Americans are losing their dream of owning a home due to increasing home prices, low wage growth, and tight mortgage conditions.
• John Hope Bryant, entrepreneur and founder of Operation Hope, suggests introducing a 40-year mortgage through the Federal Home Loan Bank and offering federal subsidies to first-time homebuyers who complete financial literacy training.
• A 40-year mortgage will make homeownership more accessible and better align with modern realities, according to Hope Bryant.

The American Dream has traditionally been associated with homeownership, representing stability, wealth accumulation, and community involvement.

Millions of Americans, particularly younger generations and first-time homebuyers, are finding it increasingly difficult to achieve the dream of owning a home due to rising home prices, stagnant wages, and restrictive mortgage terms.

I suggest a novel strategy: a 40-year mortgage program supported by the Federal Home Loan Bank (FHLB) system, which offers federal subsidies to first-time homebuyers who complete financial literacy training.

By combining extended mortgage terms, financial education, and targeted subsidies, this concept makes homeownership more accessible and promotes sustainable economic growth.

Expanding accessibility

For decades, the 30-year mortgage has been the standard in the US, offering affordable monthly payments and a reasonable repayment period. However, with rising home prices and interest rates, particularly in urban areas, even 30-year mortgages can be unaffordable for many families. A 40-year mortgage could lower monthly payments by extending the repayment period and potentially securing an affordable market rate, making homeownership more accessible to a wider population.

The 30-year mortgage term was popular during the Great Depression, but with life expectancy increasing to 80 years, a 40-year term is a better fit for modern realities.

A longer mortgage term may increase the total interest paid, but the benefits of affordability and access are worth it. For many, the alternative is renting indefinitely, which does not build equity and exposes families to rising rents and economic displacement. A 40-year mortgage enables more individuals to begin building equity earlier, providing a pathway to long-term financial stability and sustained human dignity, which is a crucial component of the American Dream. A pathway to repair the economic aspirational ladder in America.

The FHLB system, a government-sponsored enterprise, is the ideal vehicle for implementing a 40-year mortgage plan. By leveraging FHLB's established infrastructure and network of regional banks, this program can be efficiently rolled out nationwide. The FHLB's involvement ensures the program is grounded in a robust, federally backed framework, promoting stability in the housing market and tailoring solutions to meet the diverse needs of communities, from rural areas to major urban markets.

To aid first-time homebuyers, I suggest federal subsidies for mortgage rates ranging from 3.5% to 4.5% for those who complete financial literacy training. The subsidies would be limited to $350,000 for rural mortgages and $1 million for urban markets, reflecting the varying costs of homeownership across the country.

By offering financial literacy training to first-time buyers, we can empower them to manage their finances effectively, avoid predatory lending, and make informed decisions about homeownership. By linking subsidies to this training, we can motivate responsible borrowing and contribute to the financial well-being of future generations.

Addressing America's growing wealth gap

This proposal has far-reaching advantages that go beyond just individual homeowners. By increasing access to homeownership, there is a positive impact on the economy as a whole. Homeowners spend money on goods and services, which in turn supports jobs and boosts GDP growth.

Homeownership contributes to community stability by encouraging investment in neighborhoods, resulting in safer and more vibrant communities that attract businesses, increase property values, and create a positive feedback loop. Additionally, neighborhoods with higher homeownership rates tend to have higher average credit scores, lower crime rates, and support families.

By promoting homeownership, particularly for underrepresented groups, a 40-year mortgage program can help close the wealth gap in America and address social justice concerns.

This proposal aims not only to increase homeownership but also to promote sustainable economic growth. By making homeownership accessible to more Americans, we are laying the groundwork for a stronger economy. Homeowners tend to save, invest in their communities, and contribute to economic stability.

To achieve economic sustainability, we must prioritize financial literacy and responsible lending practices. This approach will prevent future crises like the 2008 housing market collapse and create a stable, growth-oriented housing market.

This strategy, backed by the FHLB system and federal subsidies, promotes financial literacy and expands homeownership in America. It fosters economic growth, community development, and wealth creation, making the American Dream more attainable for future generations.

We have the chance to make homeownership accessible to all Americans by rethinking our approach to it. By doing so, we can create a stronger, more inclusive, and more resilient economy. Let's take advantage of this opportunity and make financial literacy a civil rights issue for this and future generations. This will benefit everyone.

John Hope Bryant is the founder and CEO of Operation HOPE, a nonprofit organization that provides financial literacy. He is also a member of the CNBC Global Financial Wellness Advisory Board and the CNBC CEO Council.