Black borrowers’ mortgage rejection rate is twice that of the general population

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Owning a home is one of the main ways to build wealth. But for aspiring black homeowners, it can be a difficult step to achieve, according to a new report from LendingTree.

Research from the online lending market company finds that the mortgage rejection rate for black homebuyers is double that of the overall borrower population in the nation’s 50 largest metropolitan areas.

When it comes to applying for a home loan, 18% of black borrowers are turned down on average compared to a rejection rate of 9% for the general population.

LendingTree’s analysis is based on data from the 2020 Home Mortgage Disclosure Act.

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“The problem exists,” said Jacob Channel, senior economist at LendingTree. “We have data that confirms this.

“But there are solutions, and black buyers must not lose faith that they can never become owners,” he said.

The Best and Worst Cities for Mortgage Denial

The city with the largest gap between mortgage rejection rates for black borrowers and the overall population was St. Louis, LendingTree found, where the rate for blacks was 20.73% compared to 7.33% for the whole population, a total gap of 13.40 percentage points.

Boston and Jacksonville, Fla., tied for second place, each with a 13.34 percentage point gap in mortgage rejection rates for black people and the overall population. In Boston, the black homeownership rate was 20.85% versus 7.51%; in Jacksonville, it was 25.01% versus 11.67%.

Three west coast metro areas fared better for black shoppers: Seattle, San Francisco and Sacramento, Calif.

San Francisco came in first, with a gap of just 2.35 percentage points; 11.79% for blacks against 9.44% for the population as a whole.

Sacramento was next, with a gap of 4.64 percentage points: 13.12% versus 8.48% overall. And Seattle was No. 3, with a difference of 4.83 percentage points: 12.74% against 7.91%.

What Black Borrowers Can Do

While progress has been made in giving aspiring black homebuyers an equal footing with the general population, it has been slow and incremental, Channel said.

A recent national survey racial and ethnic minorities found that 45% of black respondents said the house they currently live in is theirs, compared to 55% who said it was rented.

That’s less than 65% of total respondents who said they live in a home they own, and the lowest rate compared to whites and minorities such as Latinos, Asians, and Native Americans. investigation by NPR, The Robert Wood Johnson Foundation and Harvard TH Chan School of Public Health found.

“There’s a lot of unconscious bias out there, and I don’t think people necessarily always realize that bias exists or how to spot it in the first place and how to prevent it,” Channel said.

Don’t lose hope because you have a request or two denied. There are always options.

Jacob Channel

senior economist at LendingTree

For black people who face barriers, it’s important to remember that it was millions of black homeowners in the United States who were able to get loans and access homeownership, he said.

“The first thing is don’t let this completely discourage you,” Channel said.

If you think you have been discriminated against, you can report it to your state attorney general or the US Department of Housing and Urban Development.

As with all homebuyers, having a solid financial profile will help improve your chances of being approved for a loan. This includes a solid credit score, stable income, and few missed bill payments.

There are programs that can help borrowers with lower credit scores, such as loans through the Federal Housing Administration, as well as state and federal programs.

The key is to remember that a rejection is not indicative of all lenders, according to Channel.

“Don’t give up hope because you have one or two applications turned down,” he said.

“There are always options,” Channel added. “There are potentially other lenders who can work with you.”

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