One of the most common paths to building wealth is through homeownership. However, when there isn't a level playing field for all people to buy a home, then there's a problem. This article looks at mortgage interest rates by race to see if there are any differences.
Below is a chart highlighting mortgage rates by race by Pew Research. The chart is from 2015 when mortgage rates were actually similar to the levels now in 2024.
The first area of the chart to look at is the ALL row to find your baseline. Then you compare the ALL percentage with the percentage next to each race by mortgage rate.
For example, 31 percent of all races paid a mortgage rate of between 3 – 3.9 percent. In comparison, only 25 percent of Blacks paid a 3 – 3.9 percent mortgage rate. Conversely, 38 percent of all Asians paid a 3 – 3.9 percent mortgage rate.
Said differently, 19.35% fewer Blacks paid a mortgage rate of 3 – 3.9 percent compared to all races. Conversely, 22.5% more Asians paid a 3 – 3.9 percent mortgage rate than all races.
Thankfully, mortgage rates between 4 – 5.9 percent don't look too distorted across all races compared to the baseline.
Notice how the All row percentages are very similar across all mortgage rates to the Whites percentages. This is likely because Whites are the majority race in America.
Obviously, it is better to have a higher percentage of your race paying the lowest mortgage interest rate. With mortgage rates at-or-near all-time lows, hopefully, every race is taking advantage.
Why Is The Mortgage Interest Rate By Race Different?
In a perfect world, we'd all be getting to refinance or take out a new mortgage at the lowest interest rate available. But we live in an imperfect world where everybody starts off with different levels of wealth.
There was a reason why America had to pass the Fair Housing Act of 1968. The Act prohibits discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, or sex.
Here's more detail about housing discrimination from Dima Williams at Forbes.
Housing Discrimination In America
The Great Depression led to the establishment of the Home Owners’ Loan Corporation and the still operational Federal Housing Administration (FHA). There was a “two-tier approach” to housing.
The latter promoted residential segregation, argues Michela Zonta, senior housing policy analyst with the Center for American Progress. It did so by shunning investments in city areas where people of color lived and by placing so-called restrictive covenants to keep middle-class neighborhoods white.
After the passage of the Housing Act of 1937, low-income public housing projects mushroomed in inner cities, replacing slums and consolidating “minority neighborhoods.” Major road construction and suburbanization further segregated American cities.
At the same time, black Americans as well as other citizens of color found it extremely hard to qualify for home loans, as the FHA and the Veterans Administration’s mortgage programs largely served only white applicants. Those discriminatory practices prevented people of color from accumulating wealth through homeownership.
“African American families that were prohibited from buying homes in the suburbs in the 1940s and 50s, and even into the 1960s, by the Federal Housing Administration gained none of the equity appreciation that whites gained,” says historian and academic Richard Rothstein in the film Segregated by Design, which is based on his acclaimed book, The Color of Law.
What's Driving Different Mortgage Rates By Race Today?
Now that we understand some of the housing history of America, we can get an inkling of how decades of inequality compounded into the significant wealth differences among races we see today.
In order to avoid discrimination based on someone's ethnic background, the Department of Housing and Urban Development (HUD) actually requires lenders to ask about borrowers' race.
HUD can then review lender records to make sure they aren't routinely turning down minorities or charging them higher fees. I would have thought that not allowing lenders to ask a borrower's race would help reduce discrimination.
After all that has happened, I don't think banks today are purposefully looking at someone's race and deciding they are going to charge a higher or lower rate by race. Instead, banks are mainly focused on the creditworthiness of the borrower. A bank's main mission is to get paid back and earn a profit.
The main reason why mortgage interest rates differ by race today is likely mainly due to different levels of income by race and different levels of wealth by race. The higher your income and wealth, the higher the likelihood your mortgage rate will be lower.
During the 2008-2009 financial crisis, banks suffered tremendous losses. As a result, banks have tightened their lending standards. For example, data released by the NY Fed showed the average credit score for an approved mortgage borrower is around 760. This is an increase from ~720 in 2009.
It's Sometimes Not Easy To Refinance
Back in April 2015, as an Asian-American, I was rejected from refinancing my mortgage. I wasn't even offered a higher rate.
Despite having enough assets to cover all liabilities by 5X, I didn't have the requisite two years of freelance income to qualify. I was obviously upset not to be able to lower my mortgage rate by 0.5%, but I didn't give up.
In 2019, I was able to prevent my 5/1 ARM from resetting to 4.5% by refinancing to a 7/1 ARM at 2.625% with no fees. It was the hardest mortgage refinance I've ever been through. The only way to succeed was to keep on pushing.
Then in 2020, I was able to get preapproved for another 7/1 ARM at 2.125% with minimal fees. This process wasn't as tough because I had paid down more debt and increased my income.
The key to getting a mortgage is to understand the financial metrics the bank is looking for and work on these financial metrics until you can qualify.
Let's go into more detail on how to get a better mortgage rate.
How To Get Lower Mortgage Interest Rates For All Races
Regardless of your race, we can all do better to get the lowest mortgage possible. Here are my tips after refinancing dozens of mortgages and getting dozens of new mortgages since 2003.
1) Know your debt ratio.
The main reason why borrowers pay higher interest rates or get rejected for a mortgage loan is that their debt-to-income ratio is too high or their credit score is too low. You're unlikely to be following the 30/30/3 rule of home buying, which means you're probably paying a higher mortgage rate.
Thanks to the new Qualified Mortgage rule, most mortgages have a maximum back-end debt-to-income ratio of 43%. In other words, if you have a monthly gross income of $10,000, the most debt you can have across all liabilities is $4,300 before being rejecting.
A front-end debt-to-income ratio calculates only your monthly housing payment. In other words, if out of your $4,300 in liabilities, $2,000 is from housing, then your front-end DTI is 20% ($2,000/$10,000).
Banks will look at both, but emphasize the back-end the most. Hence, work to lower your debt to get a lower mortgage rate because no matter what race you are. Once you get beyond these DTI limits, you're done.
2) Make more money.
If you are having trouble going the easy route of reducing your debt, then your only other alternative is to make a lot more money to get your debt-to-income ratio down. The more money you make, the lower your debt ratio and the lower your mortgage rate.
I got rejected from my mortgage refinance in 2015 because I wasn't making enough from my freelance work. As a result, I turned up the hustle meter and landed several more freelance clients so I could eventually get approved for a refinance.
Taking the attitude that the bank owes you something is the wrong approach. Nobody owes you anything!
The easiest way to make more money is to work more hours. There are actually people out there who work 40 hours a week or less and complain they can't get ahead. Meanwhile, their peers who work 60 hours or more a week.
There's nothing complicated about working more hours to get paid more money. The opportunities to earn extra income from the gig economy are endless. Further, to get ahead, nobody should be too proud to work a minimum wage job.
If you don't want to work more hours for whatever reason, then you've got to work smarter by utilizing leverage. Taking advantage of the internet is the most obvious way to leverage your brand to make more money. Billions of people are online.
Another lever is to allow your investment returns to compound over time to the point where your money is making more money than what you can make yourself. Finally, instead of only consuming, produce something that only you can produce.
3) Raise your credit score.
In order to get the lowest mortgage interest possible with the lowest fees, you now need to have a credit score of 800+. I have spoken to multiple lenders since 2019 and they all say the same thing.
Back between 2000 – 2009, the minimum credit score required to get the lowest mortgage rate was 720. Standards have gone up since the financial crisis and during the global pandemic.
Therefore, you need to learn how to improve your credit score to 800+.
Well-qualified borrowers are actually getting quoted mortgage interest rates much lower than average. Therefore, it behooves you to raise your credit score and remove and credit blights before getting a mortgage.
4) Create competition for your business.
You're always going to get the best deal if you have at least one other lender competing for your business. Because I saw a man and a woman sitting in the living room for a house I wanted to buy in 2004, I decided to offer $23,000 more simply due to anxiety!
Things worked out more than a decade later, but at the time, I felt I shouldn't have paid so much. As soon as another lender comes into the arena, your chances of getting a lower mortgage rate improve.
You should also at least make a phone call or shoot an e-mail to a competing local bank. See what they can offer your. The more competing quotes the better so you can make lenders compete for your business.
5) Promise more business.
Banks want to do business with long-term customers they like. Every single banker's mantra is to cross-sell you as many products as possible, e.g. checking account, savings account, CD account, brokerage account, mortgage, HELOC, unsecured loan, etc. The more products they can get you in, the more they will make. And the more likely you will stay with them.
Your goal is to be perceived as a thoughtful borrower with a bright future. You can do this by discussing your education, career path, aspirations, and so forth so the bank believes in your future. Also, work on developing emotional intelligence. The more they like you, the better service you will get.
6) Buy less house.
If you can't qualify for a mortgage or face paying a much higher than market rate interest rate, you've got to accept the reality that you can't comfortably afford your home. Homeownership, contrary to what you may believe, is not a right. You've got to work at being able to afford the classic American dream to get neutral inflation.
The reason why there was a housing crisis in 2008-2009 was that too many people had too much debt. Their incomes suddenly went away. They couldn't afford to float their mortgage from savings long enough until their income returned.
I recommend everybody have at least a 20% downpayment plus a 10% buffer in the form of cash or liquid securities. Follow my 30/30/3 home buying rule.
Related posts:
The Best Time To Buy Property Is When You Can Afford To
Your Chances Of Being A Millionaire By Race And Sex
Three White Tenants, One Asian Landlord
Put Yourself In The Lender's Shoes
Banks are in business to make money. Their interest rate offer corresponds to the amount of risk they see in you. The more you can look good to them on paper, the better terms you will get.
Race has nothing to do with whether your debt-to-income ratio is too high or your credit score is too low. It's your financial health and financial future that matters the most.
Although the mortgage interest rates by race data appear unfair, we can do things to get lower rates, no matter what our race. That should be music to most people's ears.
Invest In Real Estate More Surgically
The combination of rising rents and rising capital values is a very powerful wealth-builder. I encourage readers to invest in real estate to build more wealth for the long term.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $954,000 with real estate crowdfunding platforms. It was a great way to diversify away from expensive coastal city real estate.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore without the need for getting a mortgage.
Best Private Real Estate Investment Platforms
Fundrise: A way for all investors to diversify into real estate through private funds with just $10. Fundrise has been around since 2012 and manages over $3.5 billion for 2+ million investors. I've personally invested $270,000 in Fundrise so far to gain more access to Sunbelt real estate where valuations are lower and yields are higher.
The real estate platform invests primarily in residential and industrial properties in the Sunbelt, where valuations are cheaper and yields are higher. The spreading out of America is a long-term demographic trend. For most people, investing in a diversified fund is the way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. These cities also have higher growth potential due to job growth and demographic trends.
If you are a real estate enthusiast with more time, you can build your own diversified real estate portfolio with CrowdStreet. However, before investing in each deal, make sure to do extensive due diligence on each sponsor. Understanding each sponsor's track record and experience is vital.
My goal is to diversify my expensive SF real estate holdings and earn more 100% passive income. I plan to continue dollar-cost investing into private real estate for the next decade. Both platforms are long-time sponsors of Financial Samurai.
For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Mortgage interest rates by race is a Financial Samurai original post.
MOST middle class workers do not have $810k to invest in any frigging thing. Write stories with more relatable financial situations. $810,000 is no where close.
It shouldn’t matter how much I invest. In fact, I’ve invested $954,000 in private real estate funds, like Fundrise, as I bought more in 2H2023 due to better deals.
We’re past the bottom of the real estate market and I see a lot of upside.
Do you have any examples of wealthy African Americans who have been denied something rather than simply taking advantage of a government program because of the color of their skin? Money buys a lot of privilege in the USA although of course this was not always true.
It’s true what you say — but the color green is still the real color of privilege in this country. Green as in dollar bills. And instead of worrying about color — we should be working together on forcing our representatives in Washington DC to pass a bill that gives us tax relief, so we spend less as so many people are out of work now, and a lot of those jobs are never coming back. We need property tax relief, property tax breaks like in California — the only state in the union with legit property tax breaks for the middle class – for everyone in fact. Just not only rich folks. In California you have protections over your right to avoid property tax reassessment at present day rates… you get to transfer parents property taxes and keep parents property taxes… when you inherit property, in fact when inheriting property taxes for any kind of property from a surviving parent. And this holds for all property tax transfer scenarios from parents in California. And now the C.A.R. and CA Legislature are attempting to unravel key parts of the property tax transfer process… namely the parent to child transfer or parent to child exclusion or exemption from present day property tax rates – with Proposition 15 (killing commercial property tax breaks) and so-called Prop 19, which is designed to destroy the whole ball of wax! And we have been hoping the entire country, with the pandemic as key motivation, will get to enjoy California style property tax relief! So loans to intra-family trusts will be a thing of the past, pre-1978, Lord help us – if it passes in Nov. Avoiding property tax reassessment will be no more, if these special interest folks are successful. Let’s hope they are not! Anyway, this has been a saving grace in California for beneficiaries or heirs inheriting a home from parents… with that parent to child transfer and property tax exclusion always there for home owners and beneficiaries… with the ability to avoid property tax reassessment — even on a secondary property. And now, abruptly, the entire state finds out at the last moment, prior to the November vote, that something when Proposition 19 rears it’s ugly head, so to speak… claiming it’s “all for the schools and our kids…” when in fact, as property tax specialists will tell you, the real purpose behind Proposition 15 is to pay for unfunded pensions for California government workers… along with other generous benefits, salary raises and perks, as well as some very expensive, long term special interest government public works projects! Everyone wants to keep Prop 58 of course, not only to keep a low property tax rates forever, but also to be able to buyout siblings who want to sell inherited property – allowing you to save on the transfer of property from sibling to sibling, buying out a sibling’s share of inherited property of any amount when getting a loan to an irrevocable trust for $400K, $500K, $700K, whatever. Go to https://californiaproposition58.org/2020/09/17/vote-no-on-california-proposition-19/ to get really worried… or you can hope these guys are not successful at destroying critical property tax relief features in Nov. and read up at informational-blogs and Websites such as https://propertytaxtransfertrusts.com to get your facts… Or positive fact-based Proposition 13 and Proposition 58 sites like https://cloanc.com/tag/california-prop-58/ where you can also actually apply for a large loan to a trust, if you need cash right now. As we continue to struggle with this Pandemic, the middle class in all states should also have property tax relief and tax break systems to help struggling and unemployed Americans, now and going forward. Why should only wealthy families and super rich corporations or CEOs benefit from income tax loopholes and property tax relief!!
“A cycle is hard thing to get out of, and the point of the poor white communities proves my point even more.”. This would also imply that the problem has little to do with race but rather with the socioeconomic level you were raised within. Thus any proposed solution should be based upon your socioeconomic level and not your race. I suspect that the graphs in this post would correlate very similar based on socioeconomic level rather than race. Programs that simply target race leave many underpriviledged whites feeling left out – why do you think politicians like Trump are successful?
Many reasons. But it does help to receive $1 million to get startup your financial independence journey and have supporters in place.
I agree that the programs should be based on socioeconomic level, but now we are talking about classism vs racism and this country we have combination of both. African Americans were/are denied opportunities because of their race and class, on the other hand less affluent white Americans were/are denied based on the current class status ie classism.
You have to factor in history here. African-Americans were subjected to the horrors of three hundred years of shackle slavery. They were considered 3/5ths of a person in the Constitution and still are treated as lesser than today. It could be that the history taught in American schools glossed over the despicable treatment of slaves who were considered property, tortured and worked tirelessly without any compensation from their white slave masters. Not to mention the havoc wreaked by separating families. The Jim Crow era continued their horrific treatment and deprivation.
The current status of many African-Americans is a legacy of the past. There are numerous documentaries and books that document their terrible history. I use to be very critical until I became enlightened through reading and reviewing documentaries.
The only way out is education and the government should endeavor to fund programs to pay in full up to tertiary education for this disadvantaged group to break the cycle. America was founded on white supremacy. Whites have always had the upper hand as free people and there should be no reason to be living in a state of poverty unless disabled.
Why is it so many recent immigrants including from Africa make it in America while others simply reflect on their community and make excuses rather than putting in the hard work that is required to get ahead in the USA? Might the problem be much more related to poor role models rather than the color of one’s skin? Some of the poorest counties in America are predominantly white (i.e. West Virginia) and those individuals are not getting ahead either.
You always have to reflect on what happened in the past to proceed to a better future, so it’s really not an excuse, it is a cause and effect. Those things are/still are barriers in a community, you can’t feed someone a poor diet for 50-60 years and then start feeding them a quality diet for a few years and expect them to be healthy, damage is already done. I get the whole pull yourself up by your bootstrap, or just get over it feelings but that easier said than done. Psychological state or trauma can definitely be passed down through generations. To address the immigrants and other model minority myth ideologies, from my experience those that can afford to immigrate are usually already relatively affluent in their home countries and they come with a singular focus, which is great. I know plenty of Africans(Nigerians) and their parents were career professionals in their country, and the parents will literally say “If you are not going to be a lawyer, doctor, or engineer, then you can come back here”. I would assume it is the same with Asian communities as well. I am not saying that all immigrants that come are affluent, because a lot are not, I am saying conditions in which they come are totally different. A cycle is hard thing to get out of, and the point of the poor white communities proves my point even more.
You are exactly right on immigrants generally being better-educated and wealthier, and therefore, have a leg up.
This helps explain some of the recent discrepancies with say the success of Nigerians. But what about early Asian migration? The first wave of Asians that migrated to the US were laborers who worked the fields, mines, and garment factories. They also experienced racism and some of our first anti immigration policies were targeted towards Chinese.
It’s a tough topic to peel back and something my wife and I talk about frequently.
The fact Nigerians are one of the most successful demographics in the US suggest that it’s more than race. Maybe psychological or cultural.
It’s tough because a lot of migrants are now benefiting from the battles African Americans have won in this country. If it weren’t for people like Fredrick Douglass, Rosa Parks, MLK, non-white immigrant Americans would not be as well off as they are today.
Another important factor that doesn’t get talked about is geography. 50-55% of African Americans live in the South. Aside from Texas, states in the south are on the lower end of the income scale regardless of race. Where as most Asians and most migrants live along the west coast and northeast which are on the higher end of the income scale regardless of race.
Mortgage rates by state seem to be all over place though.
As African American millennial I find it disheartening that in 2020 that black wealth is on the decline and we are still on bottom of every wealth statistic. I am in the process of a refi on my home with a rate at 2.5 fixed for 30, so I don’t believe most banks/lenders discriminate the way they once did but I do recognize the historical impacts that it has had on our community. History does play a significant role and wealth statistics. We often look at the current state of a community and reflect on that instead of how we got there. If there is a direct correlation between income and credit scores and African Americans are more likely to be poor, than that is the reason for the higher interest rate for us. That being said, if a system was in place that prohibits a community from growing wealth we are still seeing the ramifications of that today. Most people are the product of there environment, you don’t see a lot of well paying jobs/careers in the community that I grew up in because most African Americans had a hard time getting those jobs. I am definitely an outlier as a software engineer, but can you blame a community for being poor when the system that was created put them there?
No we cannot blame the community.
“ We often look at the current state of a community and reflect on that instead of how we got there.”
This is an extremely important point I hope my article and your comment can help elucidate.
Thanks and congrats on a great rate!
This is an interesting read. I honestly wasn’t aware of this. It’s still tough to really tell if it’s a cause or effect.
Hi Sam,
Chase turned down our 2019 refi application because my husband didn’t have two years freelance income either (he’d just left his corporate job). We’re white. It’s a numbers thing, not race.
The stats look fairly even to me. If anything, Asian-Americans come out on top. I’m not bothered by that. Data is straightforward, unemotional. My guess is Asian-Americans grow up in families where financial wisdom is discussed more often. I’m going to guess that divorce is also low in Asian-American families. Divorce is one of the biggest destroyers of financial well-being. You do a great a job of gathering data, but you leave one thing out: emotions.
Money, home, community carry a big emotional component. Ask yourself “How often do people move away from the community in which they were born?” How does that break down by race? Is mobility entirely financial? Or is it based on the single mom who needs family to help with her kids? Or simply the emotional pull of “the known” (I grew up here, my family’s here. Why would I leave?).
Or put another way: Asians by and large are more likely to be financially literate and pay their bills! And thus they have lower mortgage rates? Shocking, I know.
But the mainstream media will tell you that it is systemic racism….but if it is then why only against the people that don’t pay their bills and have statistically lower credit scores?
Perhaps. Maybe there is a cultural thing going on b/c Asians are very anti-debt and place an extremely high importance in paying back debt in general.
However, I strongly believe that the higher your income and wealth, the lower your mortgage rate and fees tend to be.
Most important piece of statistics–correlation does not imply causation.
I would have to agree with you and disagree that race is a determining factor in lending. If it were true than I could imagine the same “discrimination” would occur against millennials, and non-college graduates.
I presume if we started controlling the variables, i.e. income, length of employment, location, etc. and all the other things we know that affect credit-worthiness fiscally-speaking, I imagine the race discrepancy would dissipate dramatically to a non-significant level.
(And on a personal note, the timing of bringing this article up from the archives seems a little odd; it feels a bit like pouring gas on an open, blazing fire. The effects of real racism and discrimination are so pronounced in other facets of our lives that some basic correlations between interest rates and race seem so insignificant.)
This is a personal finance site. Therefore, the topics are mainly around personal finance. Housing is a big part of life and a way to build wealth. We shouldn’t ignore history. And anything I can do to raise awareness about inequities I will.
Don’t give up just because there are so many issues going on. Nothing is insignificant until we stop caring or fighting.
I appreciate you tackling this subject. We cannot forget the affects of redlining. It was systemic, and directly correlates with the gutting of older housing stock with these reverse mortgages in targeted communities, and the Food Apartheid that exists in urban America.
Perhaps the fact that blacks are less credit worthy overall and would require variable control to “normalize” the results is a symptom of system racism?
I agree, as a fellow white person, it makes me feel uncomfortable when Sam talks about race issues. Therefore, I prefer not to have financial issues revolving around race to be brought up.
Fascinating insights. Refinancing can be such a pita but it’s been so worth the trouble for me. I’ve gone through the process a handful of times now so it’s gotten a bit easier. It can still take a long time, so patience is key.
Asians often have tight kin and clan networks which serve them well in pooling and building capital – networks which whites, blacks, and Hispanics generally lack. Perhaps the rest of us could learn many valuable things from Asians?
Great post! I think the negative way the article was written by Pews research saying that blacks and Hispanics pay more for mortgage rage is truly depressing! I think this is a fundamental problem with the way news gets reported by the general media in today’s society. So much of the news seems to be reported with a negative spin. I get a lot of my news from CNBC. Over the last couple of months the stock market has rallied impressively and you would think that the business news would be reflective of the positiveness of this rally. After reading some of the headlines and articles written each day I feel fearful and want to hoard cash because the world is going to end. Wishing there was a paradigm shift in the way news gets reported in a more uplifting way!!
One key is to simply ignore the news by tuning things out. We are all biased, and will subscribe to feeds that we like. But our reality is totally influenced by what we decide to look at. Hence, scrub your news feed clean and start a fresh.
One often sees these comparisons by race for income, education,etc. With respect to mortgages ahouldn’t the neighborhood also be a consideration? I cannot imagine a bank would offer the same interest rate on a property in a high crime area. Please correct me if I’m wrong.
One area that no one bothers to compare by race is property and automobile insurance. Bad nieghborhoods always demand higher rates yet no one is calling that racist.
Please excuse my typos. I’m a little tired and this is a long one. I’m a longtime lurker on your blog–I find it very interesting and it has been so very helpful to me. I would like to thank you for the the help that you have provided me.
Definitely agree that most of what matters is the numbers–especially in a world where most if not all of the mortgage lending process can take place online. But I definitely have some reservations about the naiveté of some of the comments in the original post and below..Unfortunately, there is plenty of research to show that African-Americans/Hispanics are often offered higher mortgage rates, controlling for credit scores. There is plenty of research on redlining and “ghetto loans”. I won’t argue or debate this point or any point because all that is needed to explore a different viewpoint in 2017, if you are truly open to it, is a Google search. If completely embracing the victim mentality or the model minority/bootstrap narrative on this issue is more helpful to you, whoever you may be, I get it. Some people build and lead, others jockey for their head pats and table scraps (in a variety of ways). Everyone must do what is advantageous for them, socially, politically and psychically in this world. A debate on this is a futile exercise.
I have to interrupt the small discussion about the negative impacts of the 1965 Civil Rights Act (i.e. Affirmative Action). I am just wondering about everyone’s opinion on what is now considered a threat to the 1965 Immigration and Naturalization Act, (which was established on the backs of the black civil rights movement and the grandparents of some of the people targeted by this post) The Executive Order “Protecting the Nation from Terrorist Entry into the United States”….Haven’t seen a post on that yet….disappointing..
Long out of the workforce, but I have been hearing a lot of things from my husband on the mood of his firm…It seems like vocal America is publicly on the side of the affected–especially those economically impacted by their techies, healthcare providers and quants leaving. Though, as we should know by now, public preferences are often different from private preferences. As everyone loves to say, lets just see how this plays out.
As an affluent African-American woman, I’d say that I am happily neutral, unsurprised and unbothered. When someone tells me who they are, I believe them. I can’t positively ascertain motives since the impacted countries have not had a terroristic impact on the US; and I am not wiling to publicly speculate or pontificate. Can’t expect I&N to go untouched with all the attempts made against its precursor by a variety of groups with a variety of motives and selectively historic reasons… No one in my family is affected at the moment, so I am sipping tea, with at least 600-years of American lineage (much involuntary), + multiple streams of income ready (with your amazing assistance) + U.S. passport + Husband’s dual Euro citizenship handy, watching what unfolds–as much of America has done, while women of my background have been disrespected. It’s all very interesting to say the least. Internet penny for your thoughts?
Cheers!
From one lurker to another, you are impressive. Packed so brilliance much into one comment, I read it 2 or 3 times (“as we should know by now, public preferences are often different from private preferences” — amen)! You give me hope that there are a lot of us who read this blog and learn from it, yet also have some nuance and soul that many of the FIRE types deeply lack.
Hi Cara, thanks for sharing your thoughts.
May I ask what you think are some good solutions to stamping out discrimination in mortgage lending or any kind of financial transaction?
The one benefit Pew Research does is highlight the discrepancy to let financial institutions know that someone is watching. But without saying, “Chase, your mortgage lending rates compared to the industry average by race is totally out of whack,” NOTHING HAPPENS.
Given nothing tends to happen without conflict/confrontation, all we can do is control what we can control. This will always be my message to readers. Yeah, you’re born Asian, so you have to score 200 points higher on your SAT score to have the same chance of getting into university. Live with it! Control what you can control by building your extracurriculars and net work.
We aren’t stuck with what is given to us. Fight on!
Sam
500% agree with this. The deck is dealt unfair. Some are luckier to start with than others. The super lucky ones very few will ever catch. Moaning and groaning and finding an excuse in every challenge will do absolutely nothing except leaving wallowing in you own self-pitying misery. Instead look for an opportunity in every challenge, take steps forward, better yourself and your circumstances no matter what they are and start the climb. If you don’t star the climb you will stay at the bottom. Again unfair, some people can will move up slower do to circumstances they can’t control, but they will be better off than those in similar circumstances that just want to complain and state how unfair everything is.
I read the Pew Research Center title can be read in several ways. One is the how you read it “some minorities get discriminated’.
I read it as : poor people get worse terms when getting loans. Because that title does not imply causation, merely correlation. A larger percentage of black people and hispanic are poor in America. Also, poor people in general get worse terms when borrowing money. Put this two pieces of information together, you get this: Hispanic and black persons in USA get worse terms for their loans than their white or asian counterparts. This does not imply in any way that the reason they get it is that the banks are prejudiced agains them, it merely states facts.
No, why are black and latinos in USA poorer than other races, that is a different question
That is an interesting viewpoint because I never think that a Black or Hispanic person is poor. Why do you think you associate being Black or Hispanic with being poor?
What do you think when someone writes about Asian people then?
I dont’t think all Black or Hispanic people are poor. This would make no sense, after all Beyonce and Carlos Slim Helu are quite rich.
But I know that statistically poverty is more widespread among Black and Hispanic people in the USA than their white or asian counterparts. Your second graph in this post actually illustrates this. I’m assuming you think it’s from a reputable source, otherwise you wouldn’t put it up.
So yeah, when research shows that black and hispanic people pay more and I know they are more likely to be poor, based on countless statistics, that just reads to me: Poor people are offered worse terms for loans. In other news, water is wet and the sea begins on the beach.
Now, as I said, why black and hispanic people are more likely to be poorer in the USA, well, that’s a discussion where racism and systematic oppresion might come in.
Asians absolutely hate debt. My Asian parents would put every nickel of extra cash they had into paying down the principal on their 15-year mortgage. They previously paid down their 30-year mortgage in 10 years on their old house, though my mother got a small inheritance to help on that. Then on a new house, they put a down pay of 40% and got a 15-year mortgage. Their goal is to pay it down by the time by dad retires which would mean a paydown time of about 10 years. I think they would freak the fuck out if their credit score ever dropped below 700. So yeah, I get why Asians would get lower mortgage rates.
I had no idea that race impacted rates. That’s very disappointing and something we need to address as a society.
Race does not impact rates. Debt to Income, down payment as % of purchase, credit score — those impact rates. Race is incidental, as the author indicated — if more income compared to debt lowers rate, and more income is found in one race, then that race will have lower rates — not because of the race, but because of the income. There is nothing about race that locks someone into a particular income, though.
DTI is up to 50% for conforming and FHA loans. Getting a non-QM loan is not a bad thing, there are just lower limits on points and fees allowed by the lender. Usually the best pricing adjustments occur with credit above 740.
Ay yi yi.
What are these people trying to incite here?
First off, I am an extremely successful Loan Officer at a major lender and servicer. The biggest non-bank one.
Mortgage rates are determined by only a few primary factors. Credit, equity (or lack thereof), property type, and property usage. Income does not determine pricing or rates, just whether or not you get a loan. No one is discriminating, it’s just a matter of how certain people tend to handle their income and the neighborhoods that people tend to live in. We have an SVP of Fair Lending at my company that can’t understand why a certain demographic has more declined loans or higher rates than others. She’s apparently blind to the facts.
Haters gonna hate. Lenders gonna lend.
Exactly! Thanks for your input.
Just closed a refi w/ 2.6% 30 year fixed, the bank wanted my business apparently. I don’t think race plays directly but more indirectly. Maybe asians or whites have obtained higher levels of education, income, or are able to come up w/ larger down payments etc.
Awesome post. Here’s for personal responsibility! Life choices make a huge difference in outcomes and many if these things are overlooked when comparing cohorts of people. I wouldn’t really consider this race baiting because it’s based on data from pew research. I’m sure the IQ of this blog is high enough that we don’t get overwhelmed with emotion when discussing investment. It looks like interest rates are going up which make money more expensive. This could cause the home prices to fall since many of less buying power than before. Rates for 30 year are about 4.1% and if they go to 6% then maybe bond markets will look more attractive. Personally, I’ve bought a lot of CA municipal bonds.
One big factor in getting a good rate is having at least 20% equity in the house. I have an income more than enough to support my mortgage and a credit score over 800 but I can’t get a refinance less than my current rate of 4.25%. As a physician I bought my home 2 years ago with a physician program that allowed 5% down. I used my other savings which was about 5% to fix the floors and repaint. The trade off to the program was a higher rate. 2 years later I had a 2.75% refinance rate lined up until the appraisal came in barely higher than my purchase price despite the rehab work. I could refinance only if I brought $80k to the table which I didn’t have and I’m not sure I would even if I had it. In my situation having too little equity and cash on hand killed the deal. I would suspect that is a big factor in the Pew statistics, along with income and credit score, rather than what the title suggests.
Hopefully as a physician, you will be able to make big bucks for years to come and easily get to 20%+ equity to then refinance at a lower rate.
I LIKE doing a cash-in refinance if the rate is low enough. Take your cash-in amount / annual interest savings = a percent that will probably be pretty good compared to an S&P 500 return.
See: Should I Do A Cash-In Refinance?
Thanks for the post. I do have a question regarding the following:
“I recommend everybody have at least a 20% downpayment plus a 10% buffer in the form of cash or liquid securities. ”
How would you factor deferred compensation into this? As someone who use to work in finance and have seen bonus payments become deferred over multiple years you must have some thoughts.
Using round numbers, would you personally feel comfortable buying a $1mm home with $225k cash available (so 7.5% less than your recommended 20% down payment + 10% cash buffer) if say you had $150k due to you in equal installments 6, 18, 30 months from now?
I find everyone values deferred comp very different, especially potential lenders, and am keen to know your views.
Hi Andrew,
Yes, I would, unless you think your bank will go the way of Lehman Brothers and welch on their payment. And the longer you work, the more deferred comp you will get. It’s really money.
After the initial waiting period is over, you will get deferred comp every year e.g. $100,000 bonus deferred over 3 years in thirds, in 3 years, you’ll be getting deferred comp of at least $33,333 every year.
Just don’t forget to engineer your layoff when it comes time to leave so you DON’T lose the deferred comp! I’ve got a final deferred comp payment coming this year five years AFTER I left my job!
Sam
Your graphics, charts, and data are what separates this blog to the top echelon, in my opinion. I’m going to go off of that and implement more into my Take Your Success posts.
Your excellent, informational posts always have me coming back to consume more of your content.
Not a fan of the race-based articles because it’s cringe-worthy reading the comments and seeing the thought process of some of the readers here. Race is an root issue that permeates many aspects of things they may not be overtly race-oriented. Do you have to be a person of color to be able to see both economic opportunity and understand race-relations? There is a such thing as income discrimination, etc. You can’t only be a “realist” when it comes to finance and still consider yourself well-developed individual. If others here delved into uncovering the truth as much as they delved into finance then there would be more comments worth reading.
Would love to hear some solutions from you on how to make things better. Thanks so much for contributing. Too many people talk, and don’t act. What are some suggestions?
Not sure that’s easily achievable because ‘race’ pertains to a body of people, a group at large whereas it’s an issue which individualisticly (sp?) applies.
We could also categorise mortgage rates by height, gender, eye color or number of teeth. Stats could be interesting for such population samples but not useful when applied to individuals in that population.
I don’t think it’s easily achievable, at all. Because I think a lot of discrimination is so engrained now it almost happens from a subconscious level. One solution would be to dig into some credible resources on race-based discrimination ( to come to understand that is alive and well). It’s impossible to propose solutions where most feel no problem exists or, unfortunately, are ignorant enough to believe we live in a post-racial society.
Alex C,
There is definitely other forms of discrimination, for sure, but there was no enslavement of short people, or women, or people with brown-eyes and that’s the underlying issue here. As a woman of color I understand that the first thing people notice about me in a discriminatory situation is not that I’m short.
Sam,
I’m still delving into what’s becoming a thesis in relation to the other article (Affirmative Action By Income) that featured the photo of Dr. Martin Luther King, Jr. There are so much to say with these things and it’s difficult to know where to start when many readers are so behind the curve on topics like these. It’s like trying to explain a Differential Equation principle to someone who’s never seen variables used in math. Daunting. But I have not forgotten.
Joan, the key is to not wait until you have the perfect thing to say or write, but to just do. Once you start, you can hone your message and make things better.
One of the cool reasons why I love the internet is because I don’t see what most people look like, unless they put their picture next to their name. Instead, I “see” people for what they write.
+1 for playing competing offers to reduce your mortgage rate.
I did the same a few years back when I refinanced with my existing bank. Nothing like a few better offers on hand to get someone to the negotiating table.