By S.E. Slack
Does race really play a role in whether or not a person can obtain a mortgage? To some degree, it can – but not for the outwardly discriminatory reasons one might assume, according to real estate firm Zillow.
Zillow recently teamed with the National Urban League to examine trends in minority access to housing. It found that obtaining a mortgage was often more difficult for blacks and Hispanics than it was for Asians and white Americans. To make its findings, Zillow relied on the Home Mortgage Disclosure Act and information obtained from an Ipsos survey.
“Different education levels among races, higher or lower incomes and varying credit scores all inevitably shape the home buying and homeownership experiences,” write Sklar Olsen, Zillow economist. “There is not sufficient information in the HMDA data nor in the survey data to determine if any of the findings in this report reflect illegal discrimination. Rather, it is these critical differences in qualifications and resources among whites, blacks, Asians and Hispanics that undoubtedly help explain a majority of the findings related to the differences in outcomes by race.”
According to HMDA records, blacks and Hispanics are much more likely than whites to have their mortgage application denied. When applying for a conventional loan, black applicants are 2.4 times more likely than white applicants to be denied. For Hispanic applicants that figure is 1.98 times more likely. When applying for an FHA loan, black applicants are 1.75 times more likely and Hispanic applicants are 1.47 times more likely than white applicants to be denied.
Those findings can be fairly easily explained by simple numbers, says Olsen. The statistics bear out whether or not a locale has a high or low minority population. Blacks and Hispanics tend to have a lower average income and lower credit scores than whites and Asians. Asians, in particular, tend to have the highest levels of education. That typically leads to higher income in general.
Income drives the amount of a down payment, says Olsen. Blacks tend to put 5 percent down on a home while Hispanics have about 6 percent for a down payment. Asians, on the other hand, place 20 percent or more down on a home. These down payment differences impact the decisions mortgage lenders make. The more money put down on a home, the less stringent the requirements for a home loan in general.