One of the most significant techniques to acquire wealth is to own a property. According to a recent LendingTree survey, however, that can be a challenging milestone for Black aspirants to achieve.
The mortgage denial rate for Black homebuyers in the major 50 metro regions in the US is twice that of the general borrower population, according to research from the online loan market company.
In comparison to a 9% rejection rate for the general population, 18% of Black borrowers who apply for a mortgage are typically turned down.
Based on information from the 2020 Home Mortgage Disclosure Act, LendingTree’s research.
“The problem does exist,” stated LendingTree senior economist Jacob Channel. “We have data that backs that up.
“But there are solutions, and Black homebuyers shouldn’t lose faith that they’ll never be able to become homeowners,” he said.
Mortgage denial rates in the best and worst cities
LendingTree discovered that St. Louis had the largest difference in mortgage denial rates for Black borrowers compared to the general population, with a rate for Blacks of 20.73% vs 7.33% for the general population, a difference of 13.40 percentage points.
With a difference of 13.34 percentage points between the mortgage denial rates for Blacks and the general population, Boston and Jacksonville, Florida, tied for second place. Black homebuyers made up 20.85% of Boston’s market as opposed to 7.51% there, while in Jacksonville it was 25.01% as opposed to 11.67%.
Three West Coast cities—Seattle, San Francisco, and Sacramento, California—performed best for Black homebuyers.
First place went to San Francisco, where the difference between Blacks and the general population was just 2.35 percentage points (11.79% versus 9.44%, respectively).
Next came Sacramento, where 13.12% compared to 8.48% nationwide, a difference of 4.64 percentage points. The third-place finisher was Seattle, with a difference of 4.83 percentage points (12.74% vs. 7.91%).
What can Black borrowers do?
While steps have been taken to give prospective Black homebuyers more parity with the general population, they have been slow and incremental, according to Channel.
In a recent national poll of racial and ethnic minorities, Black respondents reported owning 45% of their homes compared to 55% who indicated they were renting.
The survey from NPR, The Robert Wood Johnson Foundation, and the Harvard T.H. Chan School of Public Health found that this is the lowest rate compared to that of whites and minorities like Latinos, Asians, and Native Americans. It is also less than 65% of all respondents who said they live in a home that is owned.
“There’s a lot of subconscious bias, and I don’t think that people necessarily always realize that bias exists or how to spot it in the first place and how to prevent it,” Channel said.
For Black people who encounter obstacles, it’s crucial to keep in mind that there are millions of Black homeowners in the United States who were successful in securing loans and homeownership.
“The first thing is to just don’t let this completely discourage you,” the Channel stated.
You can file a complaint with the U.S. Department of Housing and Urban Development or your state’s attorney general if you believe you have been the victim of discrimination.
Like other house purchasers, having a solid financial history will increase your likelihood of getting a loan approval. Having a high credit score, a steady salary, and minimal late bill payments are examples of this.
Programs at the state and federal levels, as well as those that are available to applicants with lower credit ratings, include loans provided by the Federal Housing Administration.
The trick, according to Channel, is to keep in mind that not all lenders would reject a loan application.
“Don’t give up hope because you have one or two denied applications,” he said.
“There’s always options,” Channel added. “There’s potentially other lenders out there who can work with you.”