The housing market is filled with its share of challenges for aspiring homeowners. While some might argue the path toward the American Dream is similarly challenging for all, revelations in recent years have shown that some have had it harder than others amid racial disparities and discrimination.
One obstacle Black Americans disproportionately face is getting their mortgage requests denied by lenders. This was evident in a new LendingTree report that found that the share of Black homebuyers who have their mortgage requests denied is notably higher than the share of the overall population who sees the same.
Analyzing 2020 Home Mortgage Disclosure Act (HMDA) data, LendingTree’s report found that the purchase mortgage denial rate for Black homebuyers is twice as high as the denial rate for the overall mortgage borrower population of the nation’s 50 largest metros.
Based on that measure, the report found that St. Louis, Boston and Jacksonville, Florida, topped the cities with the greatest disparities between Black mortgage request denials and the overall borrower population.
Cities with the largest disparity in mortgage denial rates for black borrowers:
St. Louis, Missouri
Overall purchase mortgage denial rate: 7.33%
Denial rate for Black homebuyers: 20.73%
The spread: 13.4 percentage points
Boston, Massachusetts
Overall purchase mortgage denial rate: 7.51%
Denial rate for Black homebuyers: 20.85%
The spread: 13.34 percentage points
Jacksonville, Florida
Overall purchase mortgage denial rate: 11.67%
Denial rate for Black homebuyers: 25.01%
The spread: 13.34 percentage points
Raleigh, North Carolina
Overall purchase mortgage denial rate: 8.10%
Denial rate for Black homebuyers: 21.14%
The spread: 13.04 percentage points
New Orleans, Louisiana
Overall purchase mortgage denial rate: 9.39%
Denial rate for Black homebuyers: 21.82%
The spread: 12.43 percentage points
Pittsburgh, Pennsylvania
Overall purchase mortgage denial rate: 7.94%
Denial rate for Black homebuyers: 20.23%
The spread: 12.29 percentage points
Oklahoma City, Oklahoma
Overall purchase mortgage denial rate: 8.51%
Denial rate for Black homebuyers: 20.74%
The spread: 12.24 percentage points
Richmond, Virginia
Overall purchase mortgage denial rate: 7.46%
Denial rate for Black homebuyers: 19.54%
The spread: 12.08 percentage points
Detroit, Michigan
Overall purchase mortgage denial rate: 14.35%
Denial rate for Black homebuyers: 26.21%
The spread: 11.86 percentage points
Chicago, Illinois
Overall purchase mortgage denial rate: 8.49%
Denial rate for Black homebuyers: 20.33%
The spread: 11.84 percentage points
Key highlights
- On average, 18% of Black homebuyers are denied a mortgage—9 percentage points higher than the average denial rate for the overall population of 9%.
- St. Louis, Boston and Jacksonville see the highest percentage point differences between the denial rates for Black borrowers and the overall borrower population.
- San Francisco, Sacramento, and Seattle see the smallest percentage difference between the denial rates for Black borrowers and the overall borrower population.
- Denial rates for Black borrowers are highest in Detroit, Miami and Jacksonville, while they’re lowest in San Francisco, Seattle and Sacramento.
- The average denial rate for Black borrowers is 25.52% across Detroit, Miami and Jacksonville—more than double the average 12.55% denial rate across San Francisco, Seattle and Sacramento.
The takeaway
“Though discrimination against a homebuyer on the basis of their race is illegal, it still happens,” said Jacob Channel, LendingTree’s senior economist. “It is for this reason that both lenders and individuals must learn to spot the signs of discrimination so that they can better avoid it.”
Doubling as the author of the report, Channel states in the study, “The exact reasons behind this disparity can be difficult to pin down. But various factors likely contribute to Black borrowers’ disproportionately high denial rates.”
“For example, Black Americans tend to have lower incomes and less household wealth than members of other racial groups. Because lenders usually look at factors like a person’s income when determining whether to issue a loan, earning less money can make getting approved for a mortgage more difficult.
“Further, the legacies of historical policies meant to disenfranchise Black homebuyers, like illegal ‘redlining,’ and other discriminatory practices—like offering a borrower worse terms on their loan because of their race—also likely contribute to the disproportionately high denial rates for Black borrowers.
“But even while facing these many barriers, becoming a homeowner hasn’t been an impossibility for many Black buyers, though they may be less likely to own a home. Millions of Black Americans own their homes despite many of the heightened obstacles they may have faced.”
