Latino home loans – why it’s time to cater to this market

For now, lending rates to the segment leave much to be desired. In a recent report by Unidos US, analysts found the mortgage denial rate for Latinos had decreased significantly since the Great Recession of 2007 when Latinos were about three times more likely to be denied a mortgage to buy a home as their White counterparts – a rate of 29.5% compared to 13.3%, respectively. In a decade, the denial rate had fallen to just under 14%.

Yet Hispanic borrowers are still more likely to be denied a mortgage compared to their White counterparts to this day. Home Mortgage Disclosure Act data from this year show a continued disparity in lending to minorities, with Black and Hispanic borrowers subject to denial rates up to three percentage points than their White counterparts.

A big reason for denial rates for Latinos centers around a high debt-to-ratio rate hovering at around 26% that often results in them being denied conventional mortgages, according to Unidos US. The group’s DTI rates for non-conventional loans was at 23%, the group reported. The rates often result in loan denials given that the DTI barometer is higher than that of White borrowers.

Beyond such measures, however, Alimi suggested the intangibles that should be taken into account. An immigrant from Afghanistan who fled his motherland with family at the age of five amid a Russian invasion, he noted the premium his family places on homeownership. His Peruvian wife shares similar ideals. Such achievement of a key component of the American Dream is shared by other immigrants, yielding lowered default rates as a result, he suggested.

“Culturally, homeownership is a very prideful thing for them, and not something they will just give up,” he said. “And what tends to happen among Hispanic families is not only will they qualify when the parents qualify, but also their children. So you’ll have multiple borrowers.” The family-centered culture also tends to welcome relatives into the fold, adding to their appeal as “great borrowers,” Alimi added. “If it’s a single-family residence, an uncle or aunt join and help pay the mortgage. I would bet the amount of foreclosures for Hispanics has got to be very low because of that cultural effect.”