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LendingTree Study: Black Homebuyers More Likely to Be Denied Mortgages Than Other Homebuyers

Racial barriers to homeownership in the U.S. are an undeniable reality for many, with Black Americans often facing the most obstacles when it comes to the homebuying process.

A new study from LendingTree, one of the nation’s leading online loan marketplaces, highlights one of the biggest hurdles that disproportionately impacts Black homebuyers: being denied for a mortgage. Specifically, LendingTree’s study looks at the spread in mortgage denial rates between Black Americans and the overall population in each of the nation’s 50 largest metropolitan areas.

For both purchase and refinance mortgages, LendingTree found that Black Americans are more likely to be denied a home loan than the overall population of homebuyers.

Key findings

  • The mortgage purchase denial rate for Black homebuyers is higher than the denial rate for the overall population of homebuyers in each of the nation’s 50 largest metros. On average, Black homebuyers are denied mortgages 12.64% of the time. This is 6.49 percentage points higher than the overall denial rate of 6.15%.
  • Milwaukee, St. Louis and Cleveland, are the metros with the largest spread between the denial rate for Black homebuyers and the overall denial rate for mortgage purchase loans, while Sacramento, Calif., Seattle, and San Diego are the metros with the smallest spread. The average spread in the metros with the widest gap in denial rates is 10.96%, compared to 3.45% in the three metros with the narrowest gap.
  • As was the case for mortgage purchase loans, mortgage refinance loans are also denied at a higher rate for Black homeowners in each of the nation’s 50 largest metros. Black refinance borrowers are denied mortgage refinance loans, on average, 30.22% of the time. That’s 13.15 percentage points higher than the overall denial rate of 17.07%.
  • Phoenix, Philadelphia and Denver are the metros where the spread between the denial rate for Black homebuyers and the overall denial rate for mortgage refinance loans is the largest. Dallas, Minneapolis and Miami are the metros where the refinance denial rate spread is the smallest. The average spread is 21.93% in the metros with the largest gap, and 4.44% in the metros with the smallest gap.
  • Racial disparities in denial rates for purchase and refinance loans can be even more extreme on the county level. In some counties, even those with relatively high black populations, the denial rate for Black homebuyers and refinance borrowers alike can be as high as 100%. This can result in the spread between the overall denial rate and the denial rate for Black homeowners and buyers being over 90%. That being said, there are some counties where the denial rate for Black homeowners and buyers is lower than the denial rate for the overall population.
  • Even in majority Black counties, the denial rate is disproportionately high for both Black homeowners and homebuyers. Black homebuyers in 83 of the 95 counties with majority black populations looked at in LendingTree’s study face a higher denial rate than the overall population in those areas. Denial rates for Black refinance borrowers are equal to or lower than those of the overall population in only 9 counties.

Metros with the largest spread between denial rate for Black homebuyers and the overall denial rate for mortgage purchase loans

No. 1: Milwaukee

  • Overall mortgage purchase denial rate: 5.57%
  • Mortgage purchase denial rate for Black homebuyers: 17.73
  • Spread in mortgage purchase denial rates between Black homebuyers and the overall population of homebuyers: 12.16%

No. 2: St. Louis

  • Overall mortgage purchase denial rate: 5.21%
  • Mortgage purchase denial rate for Black homebuyers: 16.19%
  • Spread in mortgage purchase denial rates between Black homebuyers and the overall population of homebuyers: 10.98%

No. 3: Cleveland

  • Overall purchase mortgage denial rate: 5.47%
  • Mortgage purchase denial rate for Black homebuyers: 15.22%
  • Spread in mortgage purchase denial rates between Black homebuyers and the overall population of homebuyers: 9.75%

Metros with the smallest spread between denial rate for Black homebuyers and the overall denial rate for mortgage purchase loans

No. 1: Sacramento, Calif.

  • Overall mortgage purchase denial rate: 5.94%
  • Mortgage purchase denial rate for Black homebuyers: 9.01%
  • Spread in mortgage purchase denial rates between Black homebuyers and the overall population of homebuyers: 3.08%

No. 2: Seattle

  • Overall mortgage purchase denial rate: 4.96%
  • Mortgage purchase denial rate for Black homebuyers: 8.53%
  • Spread in mortgage purchase denial rates between Black homebuyers and the overall population of homebuyers: 3.57%

No. 3: San Diego

  • Overall mortgage purchase denial rate: 6.42%
  • Mortgage purchase denial rate for Black homebuyers: 10.13%
  • Spread in mortgage purchase denial rates between Black homebuyers and the overall population of homebuyers: 3.71%

Metros with the largest spread between denial rate for Black homeowners and the overall denial rate for mortgage refinance loans

No. 1: Phoenix

  • Overall mortgage refinance denial rate: 12.51%
  • Mortgage refinance denial rate for Black homeowners: 35.08%
  • Spread in mortgage refinance denial rates between Black homeowners and the overall population of homeowners: 22.57%

No. 2: Philadelphia

  • Overall mortgage refinance denial rate: 11.59%
  • Mortgage refinance denial rate for Black homeowners: 33.82%
  • Spread in mortgage refinance denial rates between Black homeowners and the overall population of homeowners: 22.23%

No. 3: Denver

  • Overall mortgage refinance denial rate: 20.98%
  • Mortgage refinance denial rate for Black homebuyers: 41.98%
  • Spread in mortgage refinance denial rates between Black homeowners and the overall population of homeowners: 21%

Metros with the smallest spread between denial rate for Black homeowners and the overall denial rate for mortgage refinance loans

No. 1: Dallas

Overall mortgage refinance denial rate: 23.08%
Mortgage refinance denial rate for Black homeowners: 23.95%
Spread in mortgage refinance denial rates between Black homeowners and the overall population of homeowners: 0.87%

No. 2: Minneapolis

  • Overall mortgage refinance denial rate: 16.42%
  • Mortgage refinance denial rate for Black homeowners: 22.02%
  • Spread in mortgage refinance denial rates between Black homeowners and the overall population of homeowners: 5.60%

No. 3: Miami

  • Overall refinance denial rate: 12.30%
  • Mortgage refinance denial rate for Black homeowners: 19.15%
  • Spread in mortgage refinance denial rates between Black homeowners and the overall population of homeowners: 6.85%

Methodology

To conduct this study, LendingTree analyzed mortgage application records from the Federal Financial Institutions Examination Council’s Home Mortgage Disclosure Act 2020 data set, the most recent available. It includes mortgage applications submitted in 2019.

The data in this study was analyzed on the Metropolitan Statistical Area or “MSA” level.

LendingTree research analyst Jacob Channel contributed to this study.

 

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