The Mortgage Process & Credit Behavior in the Hispanic Community

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The Mortgage Process & Credit Behavior in the Hispanic Community

It was reported this week that the US Homeownership Rate dropped to 63.4%. Among Hispanics it dropped from 46.1% in 2013 to 45.4% in 2014.

Why is this happening?

According to a report by the Hispanic National Mortgage Association the Hispanic Homeownership gap is “created by very specific market inefficiencies coming from the lack of Hispanic-centric understanding across the primary and secondary mortgage channels. Hispanic unique behavioral, cultural and idiosyncratic characteristics lead to differences in their credit behavior and income structures, creating barriers to homeownership.”

Mortgage

As an industry we need to do a better job explaining the mortgage process. This includes education on the different options for Hispanic homebuyers and making sure that they apply for the right kind of mortgage.

Zillow conducted a study that revealed that when applying for a conventional mortgage, Hispanic buyers are denied roughly 22% in comparison with white homebuyers (10%) applying for identical loans.

Mortgage denial rates by race

This is part of the reason why only 45% of Hispanics own their home, but also their credit behavior plays a role in the home purchase process.

Credit Behavior

Last May, the Consumer Financial Protection Bureau published a report entitled “Data Point: Credit Invisibles”. In which they show the numbers of consumers that are ‘credit invisible’ or have records that are unscored.

What did they say about the Hispanic credit behavior? The results by race suggest that Hispanics are more likely to be credit invisible” meaning they don’t have credit history on file with any of the major credit reporting companies.

For first and second generations Hispanics in the US, for cultural reasons, debt often makes them feel uneasy. Many have come from countries where the population didn’t trust the banking system.

In conclusion

The Hispanic Community needs our help understanding that they need to create a credit history in this country. Be there to help them create a plan to be ready before attempting to enter the market.

2 thoughts on “The Mortgage Process & Credit Behavior in the Hispanic Community”

  1. I understand the information being provided; what I do not understand is why you (Blogger) keep falling into the same trap of comparing us with Whites. Lets get away from portraying minorities (Hispanics) as victims. We are not victims, we make our own decisions based on the numbers that a lender or realtor puts in front of us. Some of us make poor decision when taking care of our finances, and at the end we pay the price.
    Don’t tell us how we compare to whites or blacks or any other race. Tell us how we can do better as individuals; tell us how to educate ourselves better and how we can make better decisions that will help us become homeowners.
    We are not victims which seems what you tried to do on your blog.
    Respectfully,
    Carlos

    1. Hi Carlos,

      Thanks for your comment. I will definitely keep your suggestions in mind for future blogs!

      My intention is not to show Hispanics as the victims, but to show the opportunity available to work with the Hispanic community. I like to use data to show how big the gap is. Not necessarily to compare with others, but to have a better understanding of all the hard work that has to be done. How can I tell you to run a mile if you don’t know how long a mile is?

      Having worked in this industry for so many years, I noticed that decisions are not always made by the buyer, but sometimes by a loan officer, a ‘friend’ or someone else that makes them believe that this is the best decision for them. There are many stories of people who bought a house with an ARM without knowing what that meant. Based on your information, I assume you are in this business also. I bet you have heard some stories too. However, I do agree with you that, if they signed, they have to take responsibility for their actions!

      As you can see in some of my previous blogs, if the solution is available or there is a place our community can go to get a better understanding of that subject, I share the link.

      This blog is also to create awareness that there are not that many places that offer help, especially if it is needed in Spanish. That is my mission: to create a place where the community can come and get the information that they need to make the right decision and fulfill their dreams of homeownership.

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