Know Your Rights: Closing The Homeownership Gap In The US
For over one hundred years it was common practice in the US to refuse to sell a house to someone based on the color of their skin. This created a gap in homeownership across races that was nothing short of staggering. In fact, in 1960, eight years before the Fair Housing Act was passed, Black homeownership was at 38 percent while white homeownership stood at 65 percent.
Despite laws against redlining, the disparity of homeownership between races remains extremely high. Today, white homeownership hovers around 72 percent, while Black homeownership is around 43 percent and Hispanic homeownership is at 48.4 percent. According to The National Association of Realtors, white and Hispanic Americans experienced the largest homeownership gains over the last decade. Even then, Hispanic Americans still were 30 percentage points lower. And, although the homeownership rate for Black households rose by 1.4 percentage points, it’s still lower than in 2010. Unfortunately, this is the only race/ethnic group whose homeownership rate is lower than it was ten years ago. Even though housing discrimination is actively illegal, the current gap between Black homeownership and white homeownership is 2 percentage points larger than when the Fair Housing Act was passed 62 years ago.
Homeownership is one of the main reasons behind the overall wealth gap in the US. Because of this, equal housing opportunities are critically important for creating equity for all.
Closing this gap will take more legislation and financial programs aimed at repairing the damage that has already been done. But raising homeownership rates for people who have historically been locked out of the market also requires real estate professionals to be honest and true fiduciaries. Unfortunately, this is not always the case, so every person who works with a real estate professional should know what their rights are—as a client and as a homeowner. We encourage you to share this article with them and to answer any questions they may have.
Home Buyers’ Rights
Paying For Your Home
Home buyers have the right to know what is legal and fair when purchasing a home. According to the Urban Institute, in the early 2000s Black homeowners bought homes at higher rates than white and Asian home buyers, but, along with Hispanic Americans, they were disproportionately affected by predatory lending and unsafe refinancing products.
Many things that were once true or thought to be true about mortgages, financing, and credit are no longer absolute, and knowledge while buying a home is power. As a fiduciary, your agent’s duty is to help you understand the options you have and to find a lender that will give your loan applications a fair evaluation and will offer you competitive rates and financing options.
As we discussed in our previous newsletter Mortgages 101, mortgage loans boil down to four basic factors: down payment, interest rate, term, and fixed vs. adjustable rate. One issue stopping potential buyers from purchasing homes and securing proper financing is the amount they believe they need for a down payment. Traditionally, the goal has been to put down 20 percent, but depending on the type of property and type of loan, borrowers can put down as little as 3 to 5 percent.
Mortgage brokers and lenders must legally provide and accept a mortgage loan application from anyone who wishes to apply for one, according to the Department of Housing and Urban Development, or HUD. They are also required to give to you—at no cost—a Good Faith Estimate, a Truth in Lending Disclosure Statement, a copy of your loan application, and a Mortgage Servicing Disclosure Statement. It is always your right to know exactly what you can afford and what you can expect from a lender. For more information about fair APRs and home buyers’ rights, view HUD’s Fair Lending report. If you feel you have been discriminated against, you can file a complaint here.
Typically, there are two main types of credit challenges people face when looking to buy a home—poor credit history or no credit history.
While having a good credit score is always in your favor, a poor one shouldn’t necessarily prevent you from talking to lenders and exploring your options. A good loan officer will help guide you toward credit repair and get you on the path to homeownership, even if it takes a little longer than you were initially hoping.
There are also options and solutions if you have no credit history. You may want to secure financing with the help of a cosigner, like a close family member who trusts your ability to make payments. And some lenders even use alternative forms of payment history such as student loans, rent, and utilities.
And of course, there’s no better way to improve or establish your credit rating than by having a mortgage and making payments on time.
Finding The Right Agent
Every home buyer (and home seller, for that matter) has the right to fair treatment. Every agent is bound to laws and regulations under the Fair Housing Act, which “protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities,” according to HUD.
While this may seem straightforward, unfortunately many agents have been caught participating in what is known as illegal steering. This subtle form of discrimination might look like an agent suggesting you would feel more comfortable in one area versus another, based on characteristics protected under the Fair Housing Act, like the color of your skin or your sexual orientation. No doubt you will have preferences on geographic areas, school districts, and types of homes when you are looking to buy. But you have to be the one presenting those boundaries and standards, and an agent suggesting those criteria or refusing to show you all of your options is illegal steering.
While most agents strictly abide by the Fair Housing Act—members of the National Association of REALTORS also have a Code of Ethics they must follow—it is important to know how to identify any of these illegal practices. Find an agent you can trust. Ask for referrals from people you know for agents who have proven to work fairly with minorities and marginalized groups, and always report it if you feel you have been a subject of these violations.
Win-Win Or No Deal
Historically marginalized groups cannot do the hard work of fighting for equity on their own. People who have not been affected by discriminatory practices and have benefitted from them need to not only recognize this bias, but work persistently to dismantle it.
We may not be able to introduce new legislation or enact policy change on our own, but we must keep our commitment to equity and creating win-win scenarios top-of-mind when helping all of our clients—particularly those from marginalized communities. If you want to help bridge the homeownership gap, create local partnerships, report injustices, and connect with your community. These actions aren’t just inclusive—they’re good business practices that can have a big impact.
Everyone who wants to purchase or rent a home, get a mortgage, or engage in additional housing-related activities, should be able to do so free from discrimination. For more information on the ins and outs of homeownership, download the first chapter of Your First Home here. With step-by-step advice on how to approach the home-buying process, this book is meant to help you find and finance your home.