Getting a mortgage is the most important part of buying a new home, because without a home loan, it’s impossible for many people to purchase a house. Some homeowners have a fear that they may be denied for a loan because of their religion, ethnicity, or sex. While mortgage discrimination is illegal, some lenders may still discriminate and do their best to hide it. Buyers who are afraid of mortgage discrimination need to know what to look for, so they can protect themselves. Here is what home buyers need to know about mortgage discrimination.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

What Is Mortgage Discrimination? 

While mortgage lenders are allowed to reject applicants based on their finances or credit score, it becomes discrimination if the lender rejects an applicant on any of the characteristics specified by the Fair Housing Act of 1968. This act states that discrimination based on age, sex, religion, race, ethnicity, and physical or mental handicaps is illegal. Currently, the Fair Housing Act does not protect people from discrimination based on their gender identity or sexuality.

How to Determine if Discrimination Is Occurring

It can be difficult to tell if a loan applicant is being discriminated against; because of this, applicants need to be on the lookout for red flags, including:

• Lenders discouraging an applicant from applying because they get public assistance or are part of a protected class
• Lenders who try to dissuade an applicant from buying a home in a certain area
• Lenders who ask about the applicant’s plans for having a family
• Lenders giving applicants higher interest rates, additional fees, or requiring a larger down payment than they would give someone else
• Lenders who require the applicant to have a cosigner, despite the applicant meeting all requirements
• Lenders who deny applications without any explanation

It can sometimes be difficult to tell if an applicant is being discriminated against, especially when only considering the interest rates and fees. To protect against discrimination, buyers should compare their offer to an offer from another lender to ensure that they aren’t being taken advantage of.

What to Do When Discriminated Against

Discrimination can result in two outcomes when applying for a loan: getting accepted with bad terms or getting outright rejected. If the applicant is rejected, then they have the right to ask why, and the lender is required to give a specific reason within 60 days of being asked. This can be a good way of gauging if the applicant was discriminated against or if they had a genuine problem such as a poor credit score.

If the applicant still thinks they have been discriminated against, then they can file a complaint with the US Department of Housing and Urban Development (HUD) regarding an Equal Credit Opportunity Act (ECOA) violation. Alternatively, the applicant could also try to speak to someone else at the lending company about unfair treatment.

Loan discrimination is a very serious topic that many people find themselves victim to when trying to purchase a new home. Home buyers who think they may be discriminated against for any reason need to be aware of what discrimination looks like in the lending industry, so they can identify and avoid it. Keeping an eye out for these things can help protect buyers from unfair loan terms or unfair rejections.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.