Blog, Buyers

Although mortgage rates dropped below 3% in 2020, not everyone had the same opportunities to get a home loan and benefit from these low rates. Data shows that Black home buyers and owners face extra challenges in getting a mortgage. Denial rates vary significantly by race/ethnic group, with Black Americans having the highest denial rates for purchase and refinance loans. According National Association of Realtors analysis, Black applicants are twice as likely to be denied for a mortgage compared to their White counterparts. While the main reason a mortgage lender rejected their application is the debt-to-income ratio, Black home buyers reported that they also were rejected due to a low credit score. Parsing out by the purpose of loan, denial rates for Black Americans are even higher for home purchase loans. According to the Home Mortgage Disclosure Act (HMDA), nearly 27% of the loan applications for a home purchase were denied compared to 20% which is the denial rate for refinancing.

At the local level, the denial rate is disproportionately high for Black homeowners and buyers in those states with high concentrations of Black households. Low income seems to be the main reason that more Black households were denied mortgages in these areas. Specifically, in the top 10 states with the highest denial rates, the median income of Black applicants was $62,990 on average. For instance, the median income for Black households was $51,760 in Mississippi, which was the state with the highest denial rates in the country. However, as income increases, denial rates drop. In the top 10 states with the lowest denial rates for Black households, the median income of those applicants was $81,440. For example, the median income of Black households that applied for a mortgage was $102,830 in Hawaii, the state with the lowest denial rates for Black households.

Home Buyers and Fair Housing
Additionally, recent buyers were asked if they had experienced or witnessed discrimination during their real estate transaction. Looking at ways recent home buyers witnessed or experienced discrimination in a real estate transaction, the most common was being steered toward or away from specific neighborhoods, which was reported at higher rates compared to the previous year. We saw 50% of Hispanic/Latino, 48% of Asian/Pacific Islander, and 46% of Black/African American buyers reported steering toward or away from specific neighborhoods. This is compared with the 2021 report where 34% of Hispanic/Latino, 28% of Asian/Pacific Islander, and 30% of Black/African American buyers reported steering toward or away from specific neighborhoods. This year we added the option for “appraisal of home” as a possible discrimination that could be witnessed or experienced. Nine percent of Asian/Pacific Islander, 6% of Hispanic/Latino and White/Caucasian, and 5% of Black/African American buyers reported witnessing or experiencing discrimination through a home appraisal.

In the meantime, during the pandemic, rising home prices and low housing supply have disproportionally impacted Black households more than any other race/ethnic group. According to our “Double Trouble” report, White households are 40% more likely to be able to afford to buy a home compared to Black households. Nationwide, households with incomes of $100,000 or more can afford to buy at least roughly half the homes that were listed for sale. But, while 35% of White households have that income, only 20% of Black households do. So, due to lower income, affordability for Black households is the lowest compared to any other race/ethnic group. For instance, the affordability score in the District of Columbia is 1.4 for White households but only 0.5 for their Black counterparts. Respectively, the affordability score for White households is 1 in Wisconsin compared to 0.6 for Black households.