One of the most common paths to building wealth is through homeownership. However, when there isn't a level playing field for all people to buy a home, then there's a problem. This article looks at mortgage interest rates by race to see if there are any differences.
Below is a chart highlighting mortgage rates by race by Pew Research. The chart is from 2015 when mortgage rates were actually similar to the levels now in 2022.
The first area of the chart to look at is the ALL row to find your baseline. Then you compare the ALL percentage with the percentage next to each race by mortgage rate.
For example, 31 percent of all races paid a mortgage rate of between 3 – 3.9 percent. In comparison, only 25 percent of Blacks paid a 3 – 3.9 percent mortgage rate. Conversely, 38 percent of all Asians paid a 3 – 3.9 percent mortgage rate.
Said differently, 19.35% fewer Blacks paid a mortgage rate of 3 – 3.9 percent compared to all races. Conversely, 22.5% more Asians paid a 3 – 3.9 percent mortgage rate than all races.
Thankfully, mortgage rates between 4 – 5.9 percent don't look too distorted across all races compared to the baseline.
Notice how the All row percentages are very similar across all mortgage rates to the Whites percentages. This is likely because Whites are the majority race in America.
Obviously, it is better to have a higher percentage of your race paying the lowest mortgage interest rate. With mortgage rates at-or-near all-time lows, hopefully, every race is taking advantage.
Why Is The Mortgage Interest Rate By Race Different?
In a perfect world, we'd all be getting to refinance or take out a new mortgage at the lowest interest rate available. But we live in an imperfect world where everybody starts off with different levels of wealth.
There was a reason why America had to pass the Fair Housing Act of 1968. The Act prohibits discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, or sex.
Here's more detail about housing discrimination from Dima Williams at Forbes.
Housing Discrimination In America
The Great Depression led to the establishment of the Home Owners’ Loan Corporation and the still operational Federal Housing Administration (FHA). There was a “two-tier approach” to housing.
The latter promoted residential segregation, argues Michela Zonta, senior housing policy analyst with the Center for American Progress. It did so by shunning investments in city areas where people of color lived and by placing so-called restrictive covenants to keep middle-class neighborhoods white.
After the passage of the Housing Act of 1937, low-income public housing projects mushroomed in inner cities, replacing slums and consolidating “minority neighborhoods.” Major road construction and suburbanization further segregated American cities.
At the same time, black Americans as well as other citizens of color found it extremely hard to qualify for home loans, as the FHA and the Veterans Administration’s mortgage programs largely served only white applicants. Those discriminatory practices prevented people of color from accumulating wealth through homeownership.
“African American families that were prohibited from buying homes in the suburbs in the 1940s and 50s, and even into the 1960s, by the Federal Housing Administration gained none of the equity appreciation that whites gained,” says historian and academic Richard Rothstein in the film Segregated by Design, which is based on his acclaimed book, The Color of Law.
What's Driving Different Mortgage Rates By Race Today?
Now that we understand some of the housing history of America, we can get an inkling of how decades of inequality compounded into the significant wealth differences among races we see today.
In order to avoid discrimination based on someone's ethnic background, the Department of Housing and Urban Development (HUD) actually requires lenders to ask about borrowers' race.
HUD can then review lender records to make sure they aren't routinely turning down minorities or charging them higher fees. I would have thought that not allowing lenders to ask a borrower's race would help reduce discrimination.
After all that has happened, I don't think banks today are purposefully looking at someone's race and deciding they are going to charge a higher or lower rate by race. Instead, banks are mainly focused on the creditworthiness of the borrower. A bank's main mission is to get paid back and earn a profit.
The main reason why mortgage interest rates differ by race today is likely mainly due to different levels of income by race and different levels of wealth by race. The higher your income and wealth, the higher the likelihood your mortgage rate will be lower.
During the 2008-2009 financial crisis, banks suffered tremendous losses. As a result, banks have tightened their lending standards. For example, data released by the NY Fed in February 2022 showed the average credit score for an approved mortgage borrower is around 760. This is an increase from ~720 in 2009.
It's Sometimes Not Easy To Refinance
Back in April 2015, as an Asian-American, I was rejected from refinancing my mortgage. I wasn't even offered a higher rate.
Despite having enough assets to cover all liabilities by 5X, I didn't have the requisite two years of freelance income to qualify. I was obviously upset not to be able to lower my mortgage rate by 0.5%, but I didn't give up.
In 2019, I was able to prevent my 5/1 ARM from resetting to 4.5% by refinancing to a 7/1 ARM at 2.625% with no fees. It was the hardest mortgage refinance I've ever been through. The only way to succeed was to keep on pushing.
Then in 2020, I was able to get preapproved for another 7/1 ARM at 2.125% with minimal fees. This process wasn't as tough because I had paid down more debt and increased my income.
The key to getting a mortgage is to understand the financial metrics the bank is looking for and work on these financial metrics until you can qualify.
Let's go into more detail on how to get a better mortgage rate.
Lower Mortgage Interest Rates For All Races
Regardless of your race, we can all do better to get the lowest mortgage possible. Here are my tips after refinancing dozens of mortgages and getting dozens of new mortgages since 2003.
1) Know your debt ratio.
The main reason why borrowers pay higher interest rates or get rejected for a mortgage loan is that their debt-to-income ratio is too high or their credit score is too low. You're unlikely to be following the 30/30/3 rule of home buying, which means you're probably paying a higher mortgage rate.
Thanks to the new Qualified Mortgage rule, most mortgages have a maximum back-end debt-to-income ratio of 43%. In other words, if you have a monthly gross income of $10,000, the most debt you can have across all liabilities is $4,300 before being rejecting.
A front-end debt-to-income ratio calculates only your monthly housing payment. In other words, if out of your $4,300 in liabilities, $2,000 is from housing, then your front-end DTI is 20% ($2,000/$10,000).
Banks will look at both, but emphasize the back-end the most. Hence, work to lower your debt because no matter what race you are, once you get beyond these DTI limits, you're done.
2) Make more money.
If you are having trouble going the easy route of reducing your debt, then your only other alternative is to make a lot more money to get your debt-to-income ratio down.
I got rejected from my mortgage refinance in 2015 because I wasn't making enough from my freelance work. As a result, I turned up the hustle meter and landed several more freelance clients so I could eventually get approved for a refinance.
Taking the attitude that the bank owes you something is the wrong approach. Nobody owes you anything!
The easiest way to make more money is to work more hours. There are actually people out there who work 40 hours a week or less and complain they can't get ahead. Meanwhile, their peers who work 60 hours or more a week.
There's nothing complicated about working more hours to get paid more money. The opportunities to earn extra income from the gig economy are endless. Further, to get ahead, nobody should be too proud to work a minimum wage job.
If you don't want to work more hours for whatever reason, then you've got to work smarter by utilizing leverage. Taking advantage of the internet is the most obvious way to leverage your brand to make more money. Billions of people are online.
Another lever is to allow your investment returns to compound over time to the point where your money is making more money than what you can make yourself. Finally, instead of only consuming, produce something that only you can produce.
3) Raise your credit score.
In order to get the lowest mortgage interest possible with the lowest fees, you now need to have a credit score of 800+. I have spoken to multiple lenders since 2019 and they all say the same thing.
Back between 2000 – 2009, the minimum credit score required to get the lowest mortgage rate was 720. Standards have gone up since the financial crisis and during the global pandemic.
Therefore, you need to learn how to improve your credit score to 800+.
Well-qualified borrowers are actually getting quoted mortgage interest rates much lower than average. Therefore, it behooves you to raise your credit score and remove and credit blights before getting a mortgage.
4) Create competition for your business.
You're always going to get the best deal if you have at least one other lender competing for your business. Because I saw a man and a woman sitting in the living room for a house I wanted to buy in 2004, I decided to offer $23,000 more simply due to anxiety!
Things worked out more than a decade later, but at the time, I felt I shouldn't have paid so much. As soon as another lender comes into the arena, your chances of getting a lower mortgage rate improve.
The easiest way to get real competing mortgage offers for your business is to check online through a mortgage marketplace. You'll get free, no-obligation mortgage rate quote in minutes. It is my favorite free mortgage marketplace. Once you fill out an application, qualified lenders will compete for your business.
You should also at least make a phone call or shoot an e-mail to a competing local bank. See what they can offer your. The more competing quotes the better so you can make lenders compete for your business.
5) Promise more business.
Banks want to do business with long-term customers they like. Every single banker's mantra is to cross-sell you as many products as possible, e.g. checking account, savings account, CD account, brokerage account, mortgage, HELOC, unsecured loan, etc. The more products they can get you in, the more they will make. And the more likely you will stay with them.
Your goal is to be perceived as a thoughtful borrower with a bright future. You can do this by discussing your education, career path, aspirations, and so forth so the bank believes in your future. Also, work on developing emotional intelligence. The more they like you, the better service you will get.
6) Buy less house.
If you can't qualify for a mortgage or face paying a much higher than market rate interest rate, you've got to accept the reality that you can't comfortably afford your home. Homeownership, contrary to what you may believe, is not a right. You've got to work at being able to afford the classic American dream to get neutral inflation.
The reason why there was a housing crisis in 2008-2009 was that too many people had too much debt. Their incomes suddenly went away. They couldn't afford to float their mortgage from savings long enough until their income returned.
I recommend everybody have at least a 20% downpayment plus a 10% buffer in the form of cash or liquid securities. Follow my 30/30/3 home buying rule.
Related posts:
The Best Time To Buy Property Is When You Can Afford To
Your Chances Of Being A Millionaire By Race And Sex
Three White Tenants, One Asian Landlord
Put Yourself In The Lender's Shoes
Banks are in business to make money. Their interest rate offer corresponds to the amount of risk they see in you. The more you can look good to them on paper, the better terms you will get.
Race has nothing to do with whether your debt-to-income ratio is too high or your credit score is too low. It's your financial health and financial future that matters the most.
Although the mortgage interest rates by race data appear unfair, we can do things to get lower rates, no matter what our race. That should be music to most people's ears.
Invest In Real Estate More Surgically
The combination of rising rents and rising capital values is a very powerful wealth-builder. I encourage readers to invest in real estate to build more wealth for the long term.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. It was a great way to diversify away from expensive coastal city real estate.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore without the need for getting a mortgage.
Best Private Real Estate Investment Platforms
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the easiest way to gain real estate exposure.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
For more nuanced personal finance content, join 100,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Mortgage interest rates by race is a Financial Samurai original post.
Do you have any examples of wealthy African Americans who have been denied something rather than simply taking advantage of a government program because of the color of their skin? Money buys a lot of privilege in the USA although of course this was not always true.
It’s true what you say — but the color green is still the real color of privilege in this country. Green as in dollar bills. And instead of worrying about color — we should be working together on forcing our representatives in Washington DC to pass a bill that gives us tax relief, so we spend less as so many people are out of work now, and a lot of those jobs are never coming back. We need property tax relief, property tax breaks like in California — the only state in the union with legit property tax breaks for the middle class – for everyone in fact. Just not only rich folks. In California you have protections over your right to avoid property tax reassessment at present day rates… you get to transfer parents property taxes and keep parents property taxes… when you inherit property, in fact when inheriting property taxes for any kind of property from a surviving parent. And this holds for all property tax transfer scenarios from parents in California. And now the C.A.R. and CA Legislature are attempting to unravel key parts of the property tax transfer process… namely the parent to child transfer or parent to child exclusion or exemption from present day property tax rates – with Proposition 15 (killing commercial property tax breaks) and so-called Prop 19, which is designed to destroy the whole ball of wax! And we have been hoping the entire country, with the pandemic as key motivation, will get to enjoy California style property tax relief! So loans to intra-family trusts will be a thing of the past, pre-1978, Lord help us – if it passes in Nov. Avoiding property tax reassessment will be no more, if these special interest folks are successful. Let’s hope they are not! Anyway, this has been a saving grace in California for beneficiaries or heirs inheriting a home from parents… with that parent to child transfer and property tax exclusion always there for home owners and beneficiaries… with the ability to avoid property tax reassessment — even on a secondary property. And now, abruptly, the entire state finds out at the last moment, prior to the November vote, that something when Proposition 19 rears it’s ugly head, so to speak… claiming it’s “all for the schools and our kids…” when in fact, as property tax specialists will tell you, the real purpose behind Proposition 15 is to pay for unfunded pensions for California government workers… along with other generous benefits, salary raises and perks, as well as some very expensive, long term special interest government public works projects! Everyone wants to keep Prop 58 of course, not only to keep a low property tax rates forever, but also to be able to buyout siblings who want to sell inherited property – allowing you to save on the transfer of property from sibling to sibling, buying out a sibling’s share of inherited property of any amount when getting a loan to an irrevocable trust for $400K, $500K, $700K, whatever. Go to https://californiaproposition58.org/2020/09/17/vote-no-on-california-proposition-19/ to get really worried… or you can hope these guys are not successful at destroying critical property tax relief features in Nov. and read up at informational-blogs and Websites such as https://propertytaxtransfertrusts.com to get your facts… Or positive fact-based Proposition 13 and Proposition 58 sites like https://cloanc.com/tag/california-prop-58/ where you can also actually apply for a large loan to a trust, if you need cash right now. As we continue to struggle with this Pandemic, the middle class in all states should also have property tax relief and tax break systems to help struggling and unemployed Americans, now and going forward. Why should only wealthy families and super rich corporations or CEOs benefit from income tax loopholes and property tax relief!!
“A cycle is hard thing to get out of, and the point of the poor white communities proves my point even more.”. This would also imply that the problem has little to do with race but rather with the socioeconomic level you were raised within. Thus any proposed solution should be based upon your socioeconomic level and not your race. I suspect that the graphs in this post would correlate very similar based on socioeconomic level rather than race. Programs that simply target race leave many underpriviledged whites feeling left out – why do you think politicians like Trump are successful?
Many reasons. But it does help to receive $1 million to get startup your financial independence journey and have supporters in place.
I agree that the programs should be based on socioeconomic level, but now we are talking about classism vs racism and this country we have combination of both. African Americans were/are denied opportunities because of their race and class, on the other hand less affluent white Americans were/are denied based on the current class status ie classism.
You have to factor in history here. African-Americans were subjected to the horrors of three hundred years of shackle slavery. They were considered 3/5ths of a person in the Constitution and still are treated as lesser than today. It could be that the history taught in American schools glossed over the despicable treatment of slaves who were considered property, tortured and worked tirelessly without any compensation from their white slave masters. Not to mention the havoc wreaked by separating families. The Jim Crow era continued their horrific treatment and deprivation.
The current status of many African-Americans is a legacy of the past. There are numerous documentaries and books that document their terrible history. I use to be very critical until I became enlightened through reading and reviewing documentaries.
The only way out is education and the government should endeavor to fund programs to pay in full up to tertiary education for this disadvantaged group to break the cycle. America was founded on white supremacy. Whites have always had the upper hand as free people and there should be no reason to be living in a state of poverty unless disabled.
Why is it so many recent immigrants including from Africa make it in America while others simply reflect on their community and make excuses rather than putting in the hard work that is required to get ahead in the USA? Might the problem be much more related to poor role models rather than the color of one’s skin? Some of the poorest counties in America are predominantly white (i.e. West Virginia) and those individuals are not getting ahead either.
You always have to reflect on what happened in the past to proceed to a better future, so it’s really not an excuse, it is a cause and effect. Those things are/still are barriers in a community, you can’t feed someone a poor diet for 50-60 years and then start feeding them a quality diet for a few years and expect them to be healthy, damage is already done. I get the whole pull yourself up by your bootstrap, or just get over it feelings but that easier said than done. Psychological state or trauma can definitely be passed down through generations. To address the immigrants and other model minority myth ideologies, from my experience those that can afford to immigrate are usually already relatively affluent in their home countries and they come with a singular focus, which is great. I know plenty of Africans(Nigerians) and their parents were career professionals in their country, and the parents will literally say “If you are not going to be a lawyer, doctor, or engineer, then you can come back here”. I would assume it is the same with Asian communities as well. I am not saying that all immigrants that come are affluent, because a lot are not, I am saying conditions in which they come are totally different. A cycle is hard thing to get out of, and the point of the poor white communities proves my point even more.
You are exactly right on immigrants generally being better-educated and wealthier, and therefore, have a leg up.
This helps explain some of the recent discrepancies with say the success of Nigerians. But what about early Asian migration? The first wave of Asians that migrated to the US were laborers who worked the fields, mines, and garment factories. They also experienced racism and some of our first anti immigration policies were targeted towards Chinese.
It’s a tough topic to peel back and something my wife and I talk about frequently.
The fact Nigerians are one of the most successful demographics in the US suggest that it’s more than race. Maybe psychological or cultural.
It’s tough because a lot of migrants are now benefiting from the battles African Americans have won in this country. If it weren’t for people like Fredrick Douglass, Rosa Parks, MLK, non-white immigrant Americans would not be as well off as they are today.
Another important factor that doesn’t get talked about is geography. 50-55% of African Americans live in the South. Aside from Texas, states in the south are on the lower end of the income scale regardless of race. Where as most Asians and most migrants live along the west coast and northeast which are on the higher end of the income scale regardless of race.
Mortgage rates by state seem to be all over place though.
As African American millennial I find it disheartening that in 2020 that black wealth is on the decline and we are still on bottom of every wealth statistic. I am in the process of a refi on my home with a rate at 2.5 fixed for 30, so I don’t believe most banks/lenders discriminate the way they once did but I do recognize the historical impacts that it has had on our community. History does play a significant role and wealth statistics. We often look at the current state of a community and reflect on that instead of how we got there. If there is a direct correlation between income and credit scores and African Americans are more likely to be poor, than that is the reason for the higher interest rate for us. That being said, if a system was in place that prohibits a community from growing wealth we are still seeing the ramifications of that today. Most people are the product of there environment, you don’t see a lot of well paying jobs/careers in the community that I grew up in because most African Americans had a hard time getting those jobs. I am definitely an outlier as a software engineer, but can you blame a community for being poor when the system that was created put them there?
No we cannot blame the community.
“ We often look at the current state of a community and reflect on that instead of how we got there.”
This is an extremely important point I hope my article and your comment can help elucidate.
Thanks and congrats on a great rate!
This is an interesting read. I honestly wasn’t aware of this. It’s still tough to really tell if it’s a cause or effect.
Hi Sam,
Chase turned down our 2019 refi application because my husband didn’t have two years freelance income either (he’d just left his corporate job). We’re white. It’s a numbers thing, not race.
The stats look fairly even to me. If anything, Asian-Americans come out on top. I’m not bothered by that. Data is straightforward, unemotional. My guess is Asian-Americans grow up in families where financial wisdom is discussed more often. I’m going to guess that divorce is also low in Asian-American families. Divorce is one of the biggest destroyers of financial well-being. You do a great a job of gathering data, but you leave one thing out: emotions.
Money, home, community carry a big emotional component. Ask yourself “How often do people move away from the community in which they were born?” How does that break down by race? Is mobility entirely financial? Or is it based on the single mom who needs family to help with her kids? Or simply the emotional pull of “the known” (I grew up here, my family’s here. Why would I leave?).
Or put another way: Asians by and large are more likely to be financially literate and pay their bills! And thus they have lower mortgage rates? Shocking, I know.
But the mainstream media will tell you that it is systemic racism….but if it is then why only against the people that don’t pay their bills and have statistically lower credit scores?
Perhaps. Maybe there is a cultural thing going on b/c Asians are very anti-debt and place an extremely high importance in paying back debt in general.
However, I strongly believe that the higher your income and wealth, the lower your mortgage rate and fees tend to be.
Most important piece of statistics–correlation does not imply causation.
I would have to agree with you and disagree that race is a determining factor in lending. If it were true than I could imagine the same “discrimination” would occur against millennials, and non-college graduates.
I presume if we started controlling the variables, i.e. income, length of employment, location, etc. and all the other things we know that affect credit-worthiness fiscally-speaking, I imagine the race discrepancy would dissipate dramatically to a non-significant level.
(And on a personal note, the timing of bringing this article up from the archives seems a little odd; it feels a bit like pouring gas on an open, blazing fire. The effects of real racism and discrimination are so pronounced in other facets of our lives that some basic correlations between interest rates and race seem so insignificant.)
This is a personal finance site. Therefore, the topics are mainly around personal finance. Housing is a big part of life and a way to build wealth. We shouldn’t ignore history. And anything I can do to raise awareness about inequities I will.
Don’t give up just because there are so many issues going on. Nothing is insignificant until we stop caring or fighting.
I appreciate you tackling this subject. We cannot forget the affects of redlining. It was systemic, and directly correlates with the gutting of older housing stock with these reverse mortgages in targeted communities, and the Food Apartheid that exists in urban America.
Perhaps the fact that blacks are less credit worthy overall and would require variable control to “normalize” the results is a symptom of system racism?
I agree, as a fellow white person, it makes me feel uncomfortable when Sam talks about race issues. Therefore, I prefer not to have financial issues revolving around race to be brought up.
Fascinating insights. Refinancing can be such a pita but it’s been so worth the trouble for me. I’ve gone through the process a handful of times now so it’s gotten a bit easier. It can still take a long time, so patience is key.
Asians often have tight kin and clan networks which serve them well in pooling and building capital – networks which whites, blacks, and Hispanics generally lack. Perhaps the rest of us could learn many valuable things from Asians?
Great post! I think the negative way the article was written by Pews research saying that blacks and Hispanics pay more for mortgage rage is truly depressing! I think this is a fundamental problem with the way news gets reported by the general media in today’s society. So much of the news seems to be reported with a negative spin. I get a lot of my news from CNBC. Over the last couple of months the stock market has rallied impressively and you would think that the business news would be reflective of the positiveness of this rally. After reading some of the headlines and articles written each day I feel fearful and want to hoard cash because the world is going to end. Wishing there was a paradigm shift in the way news gets reported in a more uplifting way!!
One key is to simply ignore the news by tuning things out. We are all biased, and will subscribe to feeds that we like. But our reality is totally influenced by what we decide to look at. Hence, scrub your news feed clean and start a fresh.
One often sees these comparisons by race for income, education,etc. With respect to mortgages ahouldn’t the neighborhood also be a consideration? I cannot imagine a bank would offer the same interest rate on a property in a high crime area. Please correct me if I’m wrong.
One area that no one bothers to compare by race is property and automobile insurance. Bad nieghborhoods always demand higher rates yet no one is calling that racist.
Please excuse my typos. I’m a little tired and this is a long one. I’m a longtime lurker on your blog–I find it very interesting and it has been so very helpful to me. I would like to thank you for the the help that you have provided me.
Definitely agree that most of what matters is the numbers–especially in a world where most if not all of the mortgage lending process can take place online. But I definitely have some reservations about the naiveté of some of the comments in the original post and below..Unfortunately, there is plenty of research to show that African-Americans/Hispanics are often offered higher mortgage rates, controlling for credit scores. There is plenty of research on redlining and “ghetto loans”. I won’t argue or debate this point or any point because all that is needed to explore a different viewpoint in 2017, if you are truly open to it, is a Google search. If completely embracing the victim mentality or the model minority/bootstrap narrative on this issue is more helpful to you, whoever you may be, I get it. Some people build and lead, others jockey for their head pats and table scraps (in a variety of ways). Everyone must do what is advantageous for them, socially, politically and psychically in this world. A debate on this is a futile exercise.
I have to interrupt the small discussion about the negative impacts of the 1965 Civil Rights Act (i.e. Affirmative Action). I am just wondering about everyone’s opinion on what is now considered a threat to the 1965 Immigration and Naturalization Act, (which was established on the backs of the black civil rights movement and the grandparents of some of the people targeted by this post) The Executive Order “Protecting the Nation from Terrorist Entry into the United States”….Haven’t seen a post on that yet….disappointing..
Long out of the workforce, but I have been hearing a lot of things from my husband on the mood of his firm…It seems like vocal America is publicly on the side of the affected–especially those economically impacted by their techies, healthcare providers and quants leaving. Though, as we should know by now, public preferences are often different from private preferences. As everyone loves to say, lets just see how this plays out.
As an affluent African-American woman, I’d say that I am happily neutral, unsurprised and unbothered. When someone tells me who they are, I believe them. I can’t positively ascertain motives since the impacted countries have not had a terroristic impact on the US; and I am not wiling to publicly speculate or pontificate. Can’t expect I&N to go untouched with all the attempts made against its precursor by a variety of groups with a variety of motives and selectively historic reasons… No one in my family is affected at the moment, so I am sipping tea, with at least 600-years of American lineage (much involuntary), + multiple streams of income ready (with your amazing assistance) + U.S. passport + Husband’s dual Euro citizenship handy, watching what unfolds–as much of America has done, while women of my background have been disrespected. It’s all very interesting to say the least. Internet penny for your thoughts?
Cheers!
From one lurker to another, you are impressive. Packed so brilliance much into one comment, I read it 2 or 3 times (“as we should know by now, public preferences are often different from private preferences” — amen)! You give me hope that there are a lot of us who read this blog and learn from it, yet also have some nuance and soul that many of the FIRE types deeply lack.
Hi Cara, thanks for sharing your thoughts.
May I ask what you think are some good solutions to stamping out discrimination in mortgage lending or any kind of financial transaction?
The one benefit Pew Research does is highlight the discrepancy to let financial institutions know that someone is watching. But without saying, “Chase, your mortgage lending rates compared to the industry average by race is totally out of whack,” NOTHING HAPPENS.
Given nothing tends to happen without conflict/confrontation, all we can do is control what we can control. This will always be my message to readers. Yeah, you’re born Asian, so you have to score 200 points higher on your SAT score to have the same chance of getting into university. Live with it! Control what you can control by building your extracurriculars and net work.
We aren’t stuck with what is given to us. Fight on!
Sam
500% agree with this. The deck is dealt unfair. Some are luckier to start with than others. The super lucky ones very few will ever catch. Moaning and groaning and finding an excuse in every challenge will do absolutely nothing except leaving wallowing in you own self-pitying misery. Instead look for an opportunity in every challenge, take steps forward, better yourself and your circumstances no matter what they are and start the climb. If you don’t star the climb you will stay at the bottom. Again unfair, some people can will move up slower do to circumstances they can’t control, but they will be better off than those in similar circumstances that just want to complain and state how unfair everything is.
I read the Pew Research Center title can be read in several ways. One is the how you read it “some minorities get discriminated’.
I read it as : poor people get worse terms when getting loans. Because that title does not imply causation, merely correlation. A larger percentage of black people and hispanic are poor in America. Also, poor people in general get worse terms when borrowing money. Put this two pieces of information together, you get this: Hispanic and black persons in USA get worse terms for their loans than their white or asian counterparts. This does not imply in any way that the reason they get it is that the banks are prejudiced agains them, it merely states facts.
No, why are black and latinos in USA poorer than other races, that is a different question
That is an interesting viewpoint because I never think that a Black or Hispanic person is poor. Why do you think you associate being Black or Hispanic with being poor?
What do you think when someone writes about Asian people then?
I dont’t think all Black or Hispanic people are poor. This would make no sense, after all Beyonce and Carlos Slim Helu are quite rich.
But I know that statistically poverty is more widespread among Black and Hispanic people in the USA than their white or asian counterparts. Your second graph in this post actually illustrates this. I’m assuming you think it’s from a reputable source, otherwise you wouldn’t put it up.
So yeah, when research shows that black and hispanic people pay more and I know they are more likely to be poor, based on countless statistics, that just reads to me: Poor people are offered worse terms for loans. In other news, water is wet and the sea begins on the beach.
Now, as I said, why black and hispanic people are more likely to be poorer in the USA, well, that’s a discussion where racism and systematic oppresion might come in.
Asians absolutely hate debt. My Asian parents would put every nickel of extra cash they had into paying down the principal on their 15-year mortgage. They previously paid down their 30-year mortgage in 10 years on their old house, though my mother got a small inheritance to help on that. Then on a new house, they put a down pay of 40% and got a 15-year mortgage. Their goal is to pay it down by the time by dad retires which would mean a paydown time of about 10 years. I think they would freak the fuck out if their credit score ever dropped below 700. So yeah, I get why Asians would get lower mortgage rates.
I had no idea that race impacted rates. That’s very disappointing and something we need to address as a society.
Race does not impact rates. Debt to Income, down payment as % of purchase, credit score — those impact rates. Race is incidental, as the author indicated — if more income compared to debt lowers rate, and more income is found in one race, then that race will have lower rates — not because of the race, but because of the income. There is nothing about race that locks someone into a particular income, though.
DTI is up to 50% for conforming and FHA loans. Getting a non-QM loan is not a bad thing, there are just lower limits on points and fees allowed by the lender. Usually the best pricing adjustments occur with credit above 740.
Ay yi yi.
What are these people trying to incite here?
First off, I am an extremely successful Loan Officer at a major lender and servicer. The biggest non-bank one.
Mortgage rates are determined by only a few primary factors. Credit, equity (or lack thereof), property type, and property usage. Income does not determine pricing or rates, just whether or not you get a loan. No one is discriminating, it’s just a matter of how certain people tend to handle their income and the neighborhoods that people tend to live in. We have an SVP of Fair Lending at my company that can’t understand why a certain demographic has more declined loans or higher rates than others. She’s apparently blind to the facts.
Haters gonna hate. Lenders gonna lend.
Exactly! Thanks for your input.
Just closed a refi w/ 2.6% 30 year fixed, the bank wanted my business apparently. I don’t think race plays directly but more indirectly. Maybe asians or whites have obtained higher levels of education, income, or are able to come up w/ larger down payments etc.
Awesome post. Here’s for personal responsibility! Life choices make a huge difference in outcomes and many if these things are overlooked when comparing cohorts of people. I wouldn’t really consider this race baiting because it’s based on data from pew research. I’m sure the IQ of this blog is high enough that we don’t get overwhelmed with emotion when discussing investment. It looks like interest rates are going up which make money more expensive. This could cause the home prices to fall since many of less buying power than before. Rates for 30 year are about 4.1% and if they go to 6% then maybe bond markets will look more attractive. Personally, I’ve bought a lot of CA municipal bonds.
One big factor in getting a good rate is having at least 20% equity in the house. I have an income more than enough to support my mortgage and a credit score over 800 but I can’t get a refinance less than my current rate of 4.25%. As a physician I bought my home 2 years ago with a physician program that allowed 5% down. I used my other savings which was about 5% to fix the floors and repaint. The trade off to the program was a higher rate. 2 years later I had a 2.75% refinance rate lined up until the appraisal came in barely higher than my purchase price despite the rehab work. I could refinance only if I brought $80k to the table which I didn’t have and I’m not sure I would even if I had it. In my situation having too little equity and cash on hand killed the deal. I would suspect that is a big factor in the Pew statistics, along with income and credit score, rather than what the title suggests.
Hopefully as a physician, you will be able to make big bucks for years to come and easily get to 20%+ equity to then refinance at a lower rate.
I LIKE doing a cash-in refinance if the rate is low enough. Take your cash-in amount / annual interest savings = a percent that will probably be pretty good compared to an S&P 500 return.
See: Should I Do A Cash-In Refinance?
Thanks for the post. I do have a question regarding the following:
“I recommend everybody have at least a 20% downpayment plus a 10% buffer in the form of cash or liquid securities. ”
How would you factor deferred compensation into this? As someone who use to work in finance and have seen bonus payments become deferred over multiple years you must have some thoughts.
Using round numbers, would you personally feel comfortable buying a $1mm home with $225k cash available (so 7.5% less than your recommended 20% down payment + 10% cash buffer) if say you had $150k due to you in equal installments 6, 18, 30 months from now?
I find everyone values deferred comp very different, especially potential lenders, and am keen to know your views.
Hi Andrew,
Yes, I would, unless you think your bank will go the way of Lehman Brothers and welch on their payment. And the longer you work, the more deferred comp you will get. It’s really money.
After the initial waiting period is over, you will get deferred comp every year e.g. $100,000 bonus deferred over 3 years in thirds, in 3 years, you’ll be getting deferred comp of at least $33,333 every year.
Just don’t forget to engineer your layoff when it comes time to leave so you DON’T lose the deferred comp! I’ve got a final deferred comp payment coming this year five years AFTER I left my job!
Sam
Your graphics, charts, and data are what separates this blog to the top echelon, in my opinion. I’m going to go off of that and implement more into my Take Your Success posts.
Your excellent, informational posts always have me coming back to consume more of your content.
Not a fan of the race-based articles because it’s cringe-worthy reading the comments and seeing the thought process of some of the readers here. Race is an root issue that permeates many aspects of things they may not be overtly race-oriented. Do you have to be a person of color to be able to see both economic opportunity and understand race-relations? There is a such thing as income discrimination, etc. You can’t only be a “realist” when it comes to finance and still consider yourself well-developed individual. If others here delved into uncovering the truth as much as they delved into finance then there would be more comments worth reading.
Would love to hear some solutions from you on how to make things better. Thanks so much for contributing. Too many people talk, and don’t act. What are some suggestions?
Not sure that’s easily achievable because ‘race’ pertains to a body of people, a group at large whereas it’s an issue which individualisticly (sp?) applies.
We could also categorise mortgage rates by height, gender, eye color or number of teeth. Stats could be interesting for such population samples but not useful when applied to individuals in that population.
I don’t think it’s easily achievable, at all. Because I think a lot of discrimination is so engrained now it almost happens from a subconscious level. One solution would be to dig into some credible resources on race-based discrimination ( to come to understand that is alive and well). It’s impossible to propose solutions where most feel no problem exists or, unfortunately, are ignorant enough to believe we live in a post-racial society.
Alex C,
There is definitely other forms of discrimination, for sure, but there was no enslavement of short people, or women, or people with brown-eyes and that’s the underlying issue here. As a woman of color I understand that the first thing people notice about me in a discriminatory situation is not that I’m short.
Sam,
I’m still delving into what’s becoming a thesis in relation to the other article (Affirmative Action By Income) that featured the photo of Dr. Martin Luther King, Jr. There are so much to say with these things and it’s difficult to know where to start when many readers are so behind the curve on topics like these. It’s like trying to explain a Differential Equation principle to someone who’s never seen variables used in math. Daunting. But I have not forgotten.
Joan, the key is to not wait until you have the perfect thing to say or write, but to just do. Once you start, you can hone your message and make things better.
One of the cool reasons why I love the internet is because I don’t see what most people look like, unless they put their picture next to their name. Instead, I “see” people for what they write.
+1 for playing competing offers to reduce your mortgage rate.
I did the same a few years back when I refinanced with my existing bank. Nothing like a few better offers on hand to get someone to the negotiating table.
Very informative post, Sam. I don’t think race goes too far into the equation…at the end of the day it’s all about how your financial health stacks up.
Love the tip about hustling more. I rent now, but am considering buying in a few years. The Socal market is pretty heated right now so we’ll see how they perform going forward. I’m not a big fan of debt, so ideally I’d put 25% – 30% down.
It’s a great cycle, the more financially disciplined you are, the less debt you have and the most cash you have for equity, which results in a better mortgage rate which further compounds your financial strength.
The opposite occurs for the financially undisciplined who are (rightfully) punished with higher rates.
Goes to show each financial decision you make can have many knock on effects!
Hi, I live in Australia thus am disconnected from racial others issues in the American context.
My take on this is:
1) The articale was titled with the intent of generating suspicion on the basis of race (good pickup on negative discourse Sam). It appears unsophisticated.
2) Interest rates payable are probably more a function of financial strength, education and an individual’s sense of empowerment. Race isn’t a determinant at all.
3) The initial article was broadly successful in triggering further debate despite having ‘dumb’ reasoning.
I liked it too!
I wonder if they considered in their little survey that:
1. Asians (especially older Asians) are repulsed by loans and credit in general?
2. If the Asian person cannot do without and decided to take a loan for the money, they would still look for the lowest interest rates.
P.S. I hate these surveys that place people in boxes by colour instead of say, financial maturity (IQ and EQ) or even income. Now there would be a good survey: Mortgage Interest Rates By Financial IQ/Income!
The irony over the past 8 years since the financial crisis is that those who need a loan the least were able to get the most loans with the best terms. Given the case, I feel hopeful that there will be a much smaller financial collapse in the future since borrowers have much higher credit scores, much larger downpayments, and much higher incomes.
There is definitely a bias against debt from older Asian generations, especially from Chinese, Japanese, Korean, and Indian cultures.
The advice on ways to improve your financial fitness is good, but we do know that banks have a history of red-lining as well. We know that similarly-situated individuals (exact same data except for race) receive different mortgage offers that detrimentally impact some races. This is why impact-groups send out testers. Your point about online mortgage offers notwithstanding.
Do you have some studies that show what you are referring to? I’d love to read them and incorporate them in this post. Thx
Hey Sam!
I do so love when the lines between culture and finances start to become a warped matter for ethical discussion. These days in my experience it is difficult to find many that remain cool and logical while being open to having their sense of things challenged. As a member of the majority that grew up with little financial education, I have focused on maintaining a beautiful credit report, makin’ mo money, and speaking the universal language of sales verbosely. I never have felt privileged or advantaged, but I guess the fish never sees the water as air either.
Working in a FinTech realm somewhat related to this industry, your final point is the one thing that I have learned lately that nobody really appreciates. Everyone expects free money without putting themselves in the lenders shoes. Not only is the credit worthiness of the average American wildly terrible, the financial literacy is likely worse. The entitlement that people have as I sell to individuals across this country is staggering. One of the greatest things this “Washington Outsider” government could do for this country is overhaul the schools starting with mandatory personal finance classes from an early age. Would make for less pliable consumers but one can dream of a brighter future no?
Interesting post, Sam.
I guess it kinda makes sense that Asians would get better loans rates because they are “good at math”, but races aren’t everything. I think the environment and experiences that an individual goes through affects them more than their race.
I work for one of the major banks and if you are shopping for a Jumbo loan, you owe it to yourself to check with the bank first. Direct lenders sweet spot are conforming, FHA, and VA loans. If you have 20% down or more, loan $1 over conforming loan limits in CA over $417,000, good FICO over 760, and documented income, the bank is the only way to go and yes we can meet our closing dates. Instead of walking into the bank and getting whatever bank loan officer, find a bank loan officer such as myself that self sources their business and doesn’t depend on the bank for walk ins. I have been with the bank for 3 years and previously worked for a direct lender and since I focus on Jumbo I had no choice but to join them since I could not compete against them at a direct lender. Direct lenders are your Quicken, IMortgage, RPM, etc. Everybody has their niche and the banks niche are Jumbo Loans.
“Stop buying things you do not deserve”
If I can’t pay cash, then I start to wonder if I really deserve/have earned the item or service. I will use my credit card (but that’s only to get points) because I pay off the balance every billing cycle.
I just skimmed through. I think it’s sad that Blacks have to pay higher mortgage rates when they’re also more disadvantaged. If this isn’t discrimination, I don’t know what is. Someone should really try to help them get better rates. It’s just a vicious cycle.
It’s all based on credit score, income, down payment & shopping around. You can get great soft quotes from 15+ mortgage firms on Zillow.com (and other sites) where race isn’t even an option. One of the reasons 2007-2009 happened was because based on the CRA expansion under Clinton and W, many banks loosened those standard significantly to attract more minority loans. As such, housing ownership hit a peak in 2005-2007 but we all know what came next.
I was at a 15 yr 4% loan (refi in 2011) until this month. I finally paid the sucker off. Feels liberating not to have a home loan now. The American Dream is to buy a home and then “pay the man” for 30 yrs but I needed some financial freedom.
Thank you Sam for writing these articles and responding a few posts ago. I asked your opinion on where to live and what work to do. You said any work that you excel and work hard at would be great and you also said Hawaii was the best place to live. Could I ask what your opinion on which specific career you think is best (probably finance but besides that what is your favorite?). Also, Hawaii being the best makes sense however it does have a high cost of living. What would you suggest being the minimum net worth (and house price) to have before attempting to live there since you worked on wall street and created a successful website before moving there? If the net worth isn’t reached then what affordable place would be best?
Brandon – May I ask how you plan to tie these questions in with the topic of this post?
Remember, in order to get ahead when you first start, you must first GIVE and think of others, before thinking of yourself. Taking without first offering will get you nowhere.
Related: The Importance Of Developing Emotional Intelligence For An Easier Life
I agree with you – race isn’t a factor, it is the numbers that matter to the bank. It just so happens grouped by race, the qualifying numbers are very different.
A while back I read a book Bell Curve: Intelligence and Class Structure in American Life. This article reminded me of it because of all the different ways you can group the data, but the conclusion was it all came back to intelligence as the number one indicator for everything. It was very controversial though because their data showed different bell curves of intelligence by race.
Interesting post! I must say Sam, I agree with you in many ways but there are exceptions to the rule pertaining to race. Speaking as a affluent black man, my journey to get from nothing to wealth is harder then other races, including Asians. Although your point that race should not determine where you end up in life is true, we still shouldn’t ignore the fact that the path to succeed in America for blacks and hispanics is a struggle in itself.
It cracks me up all the time when I hear and read people responses about an important matter dealing with race. They comment as if nothing is wrong, and the world is just a shiny blue planet thats perfect all around. And because Barack Obama was president, racial issues where just thrown out the window. The reason why race doesn’t matter to them is because it has and never did affect them. I call it the “AFFECT AND CAUSE RULE”. Nobody cares about something until it “Affects them. When that happens, now they believe they have a “Cause to Care”. If I lived in a world that was all black people and one white person, it wouldn’t affect me either. But that is not the world we leave in.
So what am I saying? Financial institutions ultimately care about the color green. But these same institutions are ran by humans who do see the world in different colors. How do I know, because i live it everyday. And that is just a “FACT”my friend, not an “Alternative Fact”
But again, nice post Sam! :)
Isn’t it a GOOD thing that there are people who comment on the world as if nothing is wrong because race doesn’t affect them?
I’d hope to see more of it. Content of your character, and all that…
Preach brother, I think that we are slowly but surely progressing away from the world where race is the basis by which these statistics prevail. If that were so then the percentage of Blacks with a mtge int rate of less than 3% would realistically be around 1-1.5%.
It is important to remember that historically blacks have always been at a disadvantage when compared to other races and as a result have some catching up to do. I expect that as time goes on that statistic will increase.
Love the work you do Sam, keep on keeping on.
Sounds good Boocoo Money. If you believe a black man has it more difficult than an Asian man to make it in society, who am I to argue?
All I have is my perspective as an Asian man, so I don’t dare say that it’s easier or harder being Asian than any other race. All I know is that being Asian is an even smaller minority in America than being Black, and there are some very similar racial issues that Asians face as well.
BTW, if you never told me your were Black, I’d never know or tell or think about it because all I see is Boocoo Money and what you write. I hope everybody can just focus on someone’s substance. The internet makes this easier to do.
You always have a refreshing, honest way to your writing. It’s nice to read something that is accurate and unapologetic. Let’s just say I hope that my financial health has more to do with my interest rate than anything else. Stats don’t lie though.
Some fantastic tips here!! I need to put more of them in practice. Since I’m self-employed it is difficult to get financing and I get turned down from banks a lot. I take a lot of business deductions so it’s to be expected, but kind of annoying when they just look at income and barely take into account assets. So yes… this year is all about making more coin!!
Clearly being Asian doesn’t mean you can actually get financing!! But good to know it may mean lower rates, at least statistically speaking… fascinating…
I donno Tiffany. Seems to me like the media is implying being born Asian means you will simply make more money and get better rates if we flip the equation of all the titles the media and think tanks use about other races.
Secret to riches: be Asian! Damn, I feel so lucky! :)
hahaha I love the line ““Although Asians Need Higher Grades And Test Scores To Have The Same Chance To Get Into University” you should write a post about this because it is so true. It brought back memories of when I was applying to universities straight out of high school. I was rejected by all of the state schools for engineering. When my Filipino and Chinese friends who didn’t try very hard in school and had lower SAT scores got accepted to the same schools, I asked them what they did that was different. All of them told me they wrote “prefer not to disclose” for race and “undecided” for their major.
Smart Asian friends! Glad you got the funny post title.
I do wonder if some readers don’t get the joke.
I wonder if it’s worth changing one’s name to a very neutral, undetectable name to try and get into school. It really sucks to have to get so much higher test scores to have the same chance.
Great post, as always. I agree it’s sad how our culture makes too many things “all about race”. Gee, why don’t they break out mortgage rates by income, a heck of a lot more relevant than race.
Banks work with numbers. Get your numbers right, and you’ll do better with banks. Doesn’t matter what color your skin is. Pretty simple.
Agreed. However, while as a bank can’t explicitly tell from a piece of paper what your race is, can we at least agree that there are cases where the person responsible for one’s raises, promotions, and hiring decisions (that is, one’s manager) is aware of your race? That (perhaps unconsciously) may adversely impact your income, and therefore your DTI, and therefore your rate.
Sam recently published another excellent post in which he touches on subconscious hiring practices (people tend to hire and promote people who remind them of themselves) and how that may impact promotion potential and earnings.
This is an interesting comparison. I’d like to see a comparison of credit scores, personal income, and down payment percentage broken down along these same lines, as I would think they are big factors. It would be interesting to see if when these elements are controlled for, would the race discrepancies disappear? As a real estate investor myself, I’ve found that establishing a relationship with a local banker has proven most beneficial for financing my investments.
There is another thing that affects your credit score that might be indirectly race related – immigration. Certain races are more likely to be immigrants than others. If you immigrate later in life, you have a much shorter credit history and that affects your score. The other thing that a couple of banks told me that they take into account is whether or not you are a citizen or permanent resident. If you are here on say a work visa, and in the process of applying for permanent residentship (which for certain races can easily take over five years), you will be charged a slightly higher rate irrespective of your DTI ratio.
Makes sense. If I was a bank, I’d wonder whether you’re going to stick around long enough to pay your debt or potentially leave the country if the economy turns sour and leave me holding the keys.
I don’t think any recent immigrant or temporary worker would object to not being able to get the best rate in this circumstance.
Very interesting read. I loved seeing the breakdown by race. Your analysis makes complete sense. I like how you tied it up with not embracing a victim mentality. You are right– a healthy financial lifestyle and wise habits are what really matters.
Interesting post Sam, for the people who have 6%+ mortgage rates, can you speculate on which people these could be? (underwater still from 10 years ago, dumb, old???)
This summer, I refinanced into a 5/1 ARM at 2.625% after reading your posts and doing some analysis and thinking. I’m happy with my decision and it will be fun in 4 years when it comes due! Decisions!
Simply people who have lower credit scores and higher debt-to-income ratios. Essentially, higher risk clients. They should all be refinancing down to at least 4.5% or under. But some don’t care, or simply can’t qualify until they strengthen their finances, which is the point of this article.
Financial Health and willingness to put in a little effort – we used Lending Tree (although we are still getting emails/calls after a few months – was not a huge fan of that process) a broker, and then checked with our credit union before we found a rate/cost we were comfortable with.
The credit union had the lowest rate and cheapest refi. Good day.
Yeah, some of the lenders on LendingTree can be annoying. But, who cares if you can get some written offers for free that costs no money so you can then use them to make the bank you want to work with give you a better deal.
I’ve never been able to get the best rate from a credit union. But perhaps it’s because I never tried hard.
Sam, I love the sense of responsibility you have for yourself. You expected no one to do it for you and made it happen through true grit and grind. Your failures are only fuel for the continual push forward and I love it! It is motivating to hear your stories and perspectives. I find them invaluable for a youngster such as myself trying to find my way.
I picked up a weekend job a few months ago because I am not too proud to work a close to minimum wage retail job. My net worth is now making real headway since all that extra money goes straight into debt pay downs and investments. It’s all up to me to make it happen! Thank you for the motivation you provide me through your written content. If everyone took this approach they would not feel the need to identify with any race or group. I only identify with myself because it is up to me.
Awesome job David! It’s sometimes really easy to feel we’re too good for so and so job. But there are people starving on the streets for goodness sake who would happily earn close to minimum wage if they could get the job. To not feel proud of any opportunity we have is an insult to those who do not have our same opportunities.
Fight on!
Related: Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult
It’s all about a combination of financial health and a wilingness to look around. With a high credit score, high income, and low debt your already ahead. However it’s not enough if you take the first offer that crosses your door step, like the one hat comes in the mail. The same thing applies to pay rates, insurance rates, and anything else. If your not willing to shop around and negotiate you will pay more.
Sam, I love the theme behind your articles. No one owes you anything. If you don’t like something, work harder to overcome it.
Focusing on earning more money is what I’m doing. Not for the sake of earning a better mortgage rate, but in order to reach FI faster. As you said, it’s easy to just be frugal. You can do that by just sitting on your couch. Increasing your income through your job or a side hustle takes hard work.
Finally, your final point is a great one. Banks are in business to make money. If you don’t like their offer or can’t get an offer at all, figure out a way to make yourself a more attractive borrower from a financial perspective. Lower your debt, increase your income, or show them they will lose your business to a competitor.
I used to think to myself during one of my many refinance processes, “the bank would be lucky to have me as a client,” b/c I’ve never welched on my debt and have a decent net worth. But then I realized, who gives a damn about how good I think I am? All that matters is whether I fulfill the bank’s requirements.
As soon as I got my ego out of the way, I was better able to focus on the business aspect of getting the best terms possible.
Excellent post. Unfortunately it is logical so primarily the readers of this site (and others like it) will get it. The behaviors of the individual are the key drivers for how much they pay for a loan. Most of which of course is within their control.