Javay Frye-Nekrasova wanted to buy a house. Between working from home during the pandemic and itching to start a family with her husband, she realized that they needed more space, preferably a three-bedroom, two-bathroom place. Upon reviewing their finances, the couple determined they had a budget of $300,000.
By the time the two moved from Chester, Pennsylvania to Bend, Oregon last August,they had already been low-key searching for a home to purchase for two years. Not long after their relocation, though, after running into the last in a series of snags that had colored their home-buying process, they put their search on pause — indefinitely.
Frye-Nekravosa hadn’t known all of the steps required to buy a home. When she and her spouse first found a home they liked, they reached out to a realtor, who informed them that they needed to pre-qualify for a mortgage. Then, she had to find another realtor, because, she says, she felt like the first one wasn’t that helpful.
Once she understood that she had to apply for a loan, the mortgage application process was anything but straightforward. Though the 27-year-old sex educator has technically earned more than her spouse throughout their relationship, she wasn’t approved for a loan when she applied on her own. It didn’t seem to matter when her husband came onboard as a co-applicant, because lenders said both of their incomes looked unsteady, she says. (Her husband works in construction on a contract basis.)
However, Frye-Nekrasova suspects there were other factors at play, including the fact that she works in the sex education industry. In fact, she and her husband had originally moved across the country because Frye-Nekrasova landed a job at a sex toy company. But, after a few months of seeing troubling signs at her workplace, including a lack of employee diversity and other poor practices, she resigned. With no other job lined up, Frye-Nekrasova opted to focus on running her own business. She called it quits on the house search.
“I definitely do feel there is a little bit of a discrimination piece to it,” says Frye-Nekrasova, who began working in the industry four years ago. “I’m kind of just like, Well, what’s your problem? I don’t understand. This is good stuff. This is legal work. There’s a W-2 attached to this sex shop.”
There’s another underlying barrier, though, that Frye-Nekrasova also suspects is at play: She’s a Black woman in America, and even as the housing market has boomed during the last year-plus, lingering systemic discriminatory practices in real estate and mortgage lending are keeping Black first-time homebuyers from entering the market. Experts told Refinery29 factors such as antiquated mortgage lending requirements, rising housing prices, and limited housing inventory as some of the obstacles preventing Black homebuyers from having a home of their own.
For Frye-Nekrasova, who has been dreaming of homeownership since she was a child, buying a property represents the chance to have a secure place to call her own. She will consider herself to be successful only when she buys a home. “When I have my own place, that’s when I know that I’ve done it. I’ve made it. I’m good,” Frye-Nekrasova says. “Every other day, it feels like not gonna happen, because of the way this world and the society functions and me being a Black woman trying to attain that.”
Growing up outside of Washington D.C., Frye-Nekrasova experienced housing instability when her parents divorced and were later unhoused after her father stopped paying the mortgage, she says. After earning her undergraduate degree and moving to Los Angeles to work at a talent agency and later for a production company, she became unhoused once more, sleeping in her car and crashing at friends’ places until she eventually found somewhere to stay. Today, she and her husband have a stable rental, but she still can’t quite attain the elusive goal of homeownership. And she’s far from alone.
For many Black homebuyers — particularly those who don’t come from generational wealth — buying a place of their own poses a distinct challenge, especially when it comes to the underwriting process. One of several barriers is the down payment requirement. Mortgage down payment minimums generally start at 3%, but putting down 20% can help buyers avoid paying for private mortgage insurance (PMI) and decrease their mortgage payments, according to Zillow.
While some people can go to their family members for down payment assistance, getting down payment help from her family was a challenge for Frye-Nekrasova. She asked her grandfather if he would pay the down payment for their home as a wedding gift. He declined.
Though mortgage underwriters evaluate credit scores, collateral constraints, and income to ensure that they can prevent and recoup the losses on the loans they issue, relying on these criteria can disadvantage Black borrowers, because they are more likely to have lower incomes, lower credit scores, and less generational wealth than white borrowers, says Carolina Reid, faculty research advisor at the Terner Center for Housing Innovation at the University of California-Berkeley.
“To some extent [credit scores are] picking up on the higher levels of vulnerability that Black workers often face in the labor market, and that volatility in income is more likely to lead to non-payments of various credit products,” Reid says. “The other thing is that these credit scores are often calculated in sort of a black box fashion, and we don’t know what’s going into that. And so to the extent that those models and predicted models of behavior are relying on other aspects of life that are similarly sort of influenced by racial bias, you’re going to see that in a credit score as well.”
Across a multitude of criteria for underwriting, Black homebuyers are distinctly disadvantaged, Reid says. Black workers are more likely to have lower incomes than white workers, even for similar jobs due to discrimination in the labor market. Black Americans’ lower credit scores also stem from a range of factors, including discrimination in financial markets. The intergenerational practice of redlining, the discriminatory practice of denying mortgage loans and insurance coverage on the basis of race, historic disadvantages in the labor market, and previous exclusion from higher education have all contributed to the lack of the racial wealth gap, Reid says.
Even when Black women have earned college degrees, that often winds up being a mark against them, because they hold more student debt after graduation than their peers. According to The American Association of University Women’s analysis, Black women are saddled with an average of $41,466.05 in student loan debt one year after earning their undergraduate degrees than white women, who average $33,851.98.
According to the Federal Reserve, the median wealth of white families is $188,200, compared to $24,100 of Black families in 2019. Plus, a 2021 Credit Sesame survey found that 54% of Black respondents reported a poor or a fair credit score, compared to 41% of Latinx respondents, 37% of white Americans, and 18% of Asian Americans.
No wonder that per a 2020 report from the National Association of Realtors, only 8% of first-time buyers last year were Black, even though 13.4% of the U.S. population is Black. Overall, though, Black homeownership peaked during the coronavirus pandemic in Q2 last year at 47% over 44% in Q1 2020 before dipping back down to 44% in Q4 2020 and rising again to 45% in Q1 this year, according to figures from the Federal Reserve Bank of St. Louis. This could portend good things for Black homeownership.
Sean Harden, director of real estate and construction at the Chicago-based Greenlining Realty, which develops properties in underserved communities, says he’s noticed an uptick in demand, which he surmises is due to favorable interest rates as well as buyers saving during the early months of the pandemic, and acting on how much they wanted more space.
Greenlining Realty redevelops properties in communities of color that have long been ignored, and it limits the price of its homes so as to not contribute to gentrification. The firm wants to keep homeownership affordable for local buyers of color, and does so by rehabbing properties in distressed areas. But, this type of development comes with extra expenses, such as the costs of bringing properties up to code, Harden says, and notes that he wishes he had more governmental support.
In order to help developers looking to repair properties in underserved communities, Harden says, the government needs to to hold banks accountable for discriminatory lending practices under the Community Reinvestment Act, a 1977 law that encourages banks to extend credit to low and middle-income communities. Furthermore, city governments’ urban planning departments could incentivize developers to rehabilitate and use space in the community that would increase home values, like allowing developers to create gardens out of nearby empty lots, Harden says.
There are still more roadblocks standing in the way of Black first-time homebuyers, though, like discriminatory real estate practices that might prevent people from seeing all the available options, says Castleigh Johnson, founder and CEO of MyHomePathway, an app that guides users through home-buying criteria and connects them with lenders. Real estate agents might engage in steering, a practice of only showing select neighborhoods to borrowers of color, rather than exploring all the communities that meet their qualifications, Johnson says.
Then, too, while the Federal Housing Administration (FHA) offers mortgage insurance with lower borrower qualifications through approved lenders, some sellers have been outright refusing offers from buyers with FHA loans, which can exclude Black borrowers using FHA loans as an accessible path toward homeownership, Johnson says.
Unfortunately, there often aren’t many other viable mortgage opportunities. While it can be seen as a positive development that financial technology (FinTech) firms — including digital mortgage lenders, online banks and other technology companies that facilitate financial transactions — assess borrowers based on non-traditional indicators, they need to be more transparent about the criteria upon which they’re evaluating mortgage applicants, so as to not replicate the discriminatory practices as seen in the conventional banks, Reid says.
And, research from the University of California-Los Angeles suggests that lenders’ success in addressing mortgage lending discrimination is mixed. UCLA researchers concluded in a November 2019 paper that FinTech mortgage lenders charge higher rates to equally qualified Black and Latinx borrowers, but they also reduce rate disparities and don’t discriminate in rejection rates.
However, recent reporting indicates that mortgage application algorithms are exacerbating existing inequities. A recent investigation by The Markup found that mortgage loan applicants of color were more likely to be denied than similarly qualified white applicants. Black applicants were the most likely to be denied, followed by Native Americans, Asian Americans and Pacific Islanders and Latinx applicants, The Markup found.
All of these home-ownership roadblocks are ones with which Frye-Nekrasova is very familiar. In her indefinitely postponed home-buying journey, she found that the resources and legislation aimed at assisting first-time homebuyers are disconnected from what she and many first-time homebuyers actually need. These days, she and her husband are living in an apartment in Bend, Oregon. Their plan is to wait two years and build up their income history before resuming their search for a home for keeps.
She’d like to see lenders evaluate applicants’ rental histories rather than prioritize income requirements. “You would think that [lenders] are like, Oh look, you can pay your rent, you’re good. Let’s go ahead, and give you a mortgage,” she says.
Such reforms would benefit individuals as well as the greater good. “We know from other countries that societies that are deeply unequal by class, by income, by race 一 they’re not healthy societies. They’re not healthy countries,” Reid says. “I’d like to think that we can do better and that we can invest in all people.”
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