Fair Housing

Equal Opportunities for Home Buyers

A major element of the American dream is homeownership. Owning a home is one of the main ways of accumulating wealth in our society, and this form of wealth acquisition is protected in the U.S. tax code. Being a homeowner increases people's feelings of control over their lives and their sense of well-being. High rates of homeownership are believed to strengthen neighborhoods, by increasing residents' commitment to their communities.

Discrimination in Lending

Not all Americans, however, enjoy equal access to the benefits of homeownership. Federal law prohibits discrimination in the home-buying process. However, research clearly shows that minorities still face substantial discrimination in the process of looking for a home to buy or rent.

Many believe that minorities also face discrimination when they try to obtain a mortgage — a necessity for most Americans wanting to buy a home. There is no question that minorities are less likely than whites to obtain mortgage financing. Once financed, minorities receive less generous loan amounts and terms, including higher interest rates. But whether these differences are the result of discrimination or poorer credit ratings has been the subject of debate.

Choosing a Lender

The existing research evidence concludes that minority homebuyers in the United States do face discrimination from mortgage lending institutions. Here are some alarming facts for minorities to consider when choosing a lender.

• The National Fair Housing Alliance found evidence of discrimination at significant levels in many cities.
• Instances of discrimination have been documented at every major stage in the mortgage lending process.
• Minorities were less likely to receive information about different loan products, they received less time and information from loan officers, and they were quoted higher interest rates in most cities.
• Large differences in loan denial rates were found between minority and white applicants, other things being equal.
• Even among institutions with good intentions, minority customers were not always receiving equal treatment.

The evidence underscores the need for minorities to be careful consumers. Minority homebuyers do not have the luxury of assuming that their loan officer is looking out for their best interests. It may be particularly important for minorities to ask detailed questions, get multiple quotes, and carefully research funding possibilities. Avoid lenders that seem insensitive or ignorant to minority concerns. But despite these impediments, it is important to stay focused on the goal of homeownership — an opportunity that minority families of the past were legally denied.

Source for more information: Mortgage Lending Discrimination: A Review of Existing Evidence, by Margery Austin Turner, Felicity Skidmore. The Urban Institute, Washington DC. (pdf).

Fast Facts

Look for the Fair Housing symbol when borrowing. This is the symbol used by the Office of Fair Housing and Equal Opportunity (FHEO), which enforces federal laws and establishes policies that make sure all Americans have equal access to the housing of their choice. The Office of FHEO is part of the U.S. Department of Housing and Urban Development.