Black homebuyers face significant challenges in securing a mortgage loan for homeownership, and a new study has found that these obstacles are unlikely to disappear anytime soon.
Black applicants are 1.7 times more likely to be denied a mortgage than applicants from other racial backgrounds, according to the latest report from LendingTree. In 2024, 19% of Black applicants were denied mortgages. For perspective, that’s about 7.73 percentage points higher than the denial rate for all other applicants, which is 11.27%.
“For generations, homeownership has been one of the most powerful tools for building wealth that Americans have. Homeownership isn’t cheap, and there are ongoing costs; however, the equity that you can build over the years can be incredibly helpful,” said Matt Schulz, chief consumer finance analyst at LendingTree, in the report. “Not only can it provide you funding when you’re in a financial pinch, but it can also be used in working toward other financial goals.”
Across the board, there are significant disparities that persist for Black homebuyers. In 2023, roughly 65% of Americans owned their home. That number was approximately 44.7% for Black Americans, according to National Mortgage News.
Why Black Homebuyers Struggle To Obtain Mortgage Loans
High mortgage denial rates— along with limited generational wealth, income disparities, and discriminatory practices — are just one of the persistent challenges that keep the Black homeownership rate lower than that of other racial groups, LendingTree points out in its report.
One of the primary reasons for these disparities is the variation in credit scores. Black Americans had a median VantageScore of 639 compared to 730 for white applicants. Black Americans are more likely to have little or no credit history at all. This means that Black homebuyers are more likely to be turned down when applying for a mortgage, and if approved, their mortgage loans may have higher interest rates.
“There’s very little in life that is more expensive than crummy credit,” says Schulz. “It can cost you tens of thousands of dollars or more over the course of your life in the form of higher interest rates and more fees. It can even keep you from getting a loan altogether.”
While there are disparities nationwide, Michigan and North Carolina are among the states with the worst disparities. LendingTree’s study reveals that Detroit, Grand Rapids, Michigan, and Raleigh, North Carolina, have the widest denial rate gaps among the 50 largest metropolitan areas.
In Grand Rapids, the denial rate for Black borrowers is 23.90%, compared with 14.15% among applicants of all races — a 9.75 percentage point difference. In Detroit, there is an 8.54-point gap, where 21.25% of Black applicants are denied, compared with 12.71% of all applicants. Raleigh has the third-highest gap, with an 8.44 percentage point difference. The denial rate is 16.41% among Black borrowers, compared with 7.97% among all homebuyers.
Salt Lake City, Utah, San Antonio, Texas, and Fresno, California, have the lowest discrepancies for Black applicants.
What Black Homebuyers Should Know
LendingTree analysts recommend that Black homeowners take proactive steps to improve their credit. Pay debt and loan payments on time, make bigger payments to bring down balances, and avoid taking on new debt when applying for a mortgage.
Black homebuyers should research resources such as education courses, down payment assistance programs, and community and state initiatives.
“One of the most important things you can do is shop around,” Schulz adds. “Different lenders can make very different offers, including loan amounts, rates, fees, and more, but you won’t know unless you take the time to comparison shop.”
The best thing Black homebuyers can do is get quotes from at least three lenders, which should include a mix of lender types. This can result in a lower interest rate and better mortgage terms.
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