Do Minorities Face Home Loan Disadvantages?

While diversity and equality are widely debated topics in American politics, many minorities face measurable disparities when it comes to real estate. According to a recent data release from the Home Mortgage Disclosure Act (HMDA), white and Asian borrowers are twice as likely to be approved for a conventional home loan compared to black or Hispanic borrowers. Although efforts to improve mortgage accessibility are underway, these racial inequalities remain a considerable hurdle for prospective homeowners.

Over 22 percent of black applicants were denied conventional home loans in 2015, down from 30.5 percent just five years prior. Meanwhile, 17.3 percent of Hispanic applicants were denied last year compared to 25 percent in 2010. Although minority group mortgage approval shows a slight improvement over this five-year span, this doesn’t necessarily indicate a sea change in loan access for minorities — approval rates are expanding among all borrowers, regardless of race. Last year, 10.4 percent of all conventional loan applicants were denied compared to 14.2 percent in 2010.

Zillow Chief Economist Svenja Gudell says that while black and Hispanic home buyers are approved at higher rates now, additional progress must be made given the stark differences in loan authorization between groups. Denial rates in 2015 among white and Asian home buyers were a much lower 8.7 and 11.1 percent, respectively.

Lenders are continuing to develop programs to increase homeownership diversity, including Fannie Mae and Freddie Mac. In late October, the Federal Housing Finance Agency announced new initiatives to improve credit access for minorities. In a recent Zillow Confidence Housing Survey, 68 percent of Hispanic respondents and 65 percent of black respondents said homeownership was a key component of the American Dream, whereas just 59 percent of whites and 58 percent of Asians expressed the same sentiment.

Despite recent efforts made by lenders and strong homeownership aspirations among black and Hispanic households, the mortgage divide still exists. Blacks and Hispanics currently hold the lowest homeownership rates in the United States. And although current homeownership rates show greater diversity, the gap in homeownership has held steady for more than a century.