Dive Brief:
-
Hispanics account for more than 17% of the U.S. population, and their numbers are growing. Yet a demographic that could potentially become a substantial force in the homebuying market might not — because Hispanic would-be homebuyers are having trouble qualifying for mortgages.
-
That is the conclusion of a McClatchy newspapers analysis of homeownership rates and mortgage data that showed many Hispanics, whose rate of homeownership is at a 14-year-low, are unable to get home loans because they are more likely to pay cash than use credit — and therefore have not amassed the credit histories that conventional lenders use to determine their ability to repay.
-
Their custom to share homes with extended family and pool money for major purchases is not considered by traditional measures of creditworthiness, Joe Nery, president-elect of the National Association of Hispanic Real Estate Professionals, told a reporter.
Dive Insight:
Hispanics are not the only group of potential homebuyers having trouble qualifying for mortgages because of a lack of conventional credit history.
The Consumer Financial Protection Bureau reported in May that 26 million Americans are “credit invisible”; that is, their credit histories have not been recorded by any of the major credit-reporting companies that creditors rely on when deciding whether to approve credit cards or home and car loans. Approximately 15% of that number are black and Hispanic consumers.
Those credit histories translate into FICO scores, which mortgage lenders require for loan approvals. FICO scores typically do not include a borrower’s history with rent payments.
The McClatchy article quoted consumer credit advocates who encouraged lenders to consider alternative measurements of creditworthiness, especially for first-time homebuyers with sparse credit histories.