If you are a real estate agent or mortgage lender in Texas, you may have some great opportunities to grow your business in the future while helping the state’s growing Hispanic population become homeowners.
The future success of Realtors, mortgage lenders and others in the housing industry depends on reaching this vitally important group of future homebuyers. The Hispanic population is already sizable, invested in homeownership and growing faster than other demographics.
As President and CEO of the Mortgage Bankers Association David Stevens says, “The significance of Hispanics to housing and the economy will only grow, creating opportunity for all who focus on this vibrant, dynamic and impactful part of the U.S. economy.”
Here are a few statistics to show just how dynamic this population base is for the housing industry:
- Texas has more Hispanics than any other state except California.
- Dallas-Fort Worth ranks sixth nationally among metropolitan areas for total Hispanic population, according to the Pew Research Center.
- In 2015, Hispanics achieved a net increase of 245,000 households—69 percent of the total net growth in U.S. homeownership last year.
- Hispanics were the only racial/ethnic group to raise their homeownership rates in 2015.
- The median income for this demographic is on the rise, with 14 percent earning over $100,000, 35 percent earning over $75,000, and 43 percent earning more than $50,000 a year in 2014.
- The Urban Institute predicts that Hispanic homeownership will account for 52 percent of new homeowners between 2010 and 2030.
This is good news for the housing industry, as Hispanics already make a positive impact on housing in Dallas-Fort Worth. Their homeownership involvement is expected to become more pronounced in the years ahead as their percent of the total population rises.
The State of Hispanic Homeownership Report, recently produced by the Hispanic Wealth Project and the National Association of Hispanic Real Estate Professionals, provides some great insight on what’s happening with this important demographic.
Hispanic Millennials and Homeownership
Hispanic millennials are fueling the demand for housing. These younger adults, born in the U.S., earn more and have achieved higher educational levels than most first-generation Hispanic immigrants.
As of 2013, there were already 1.1 million Hispanic homeowners under the age of 34.
Becoming a homeowner comes with some challenges. The State of Hispanic Homeownership Report notes that the denial rate for Hispanics for home purchase mortgages was at 18 percent, compared to 11 percent for non- Hispanics.
The reasons are complex, the report notes, but a common reason it says is that lenders are continuing to put more restrictive credit overlays on loans above and beyond what Fannie Mae and Freddie Mac require.
In some instances, the report notes, Hispanics may not be the “traditional” applicant that mortgage lenders are used to assisting. For example, they may have two jobs, or a job plus an entrepreneurial endeavor. They may have a minimal credit history because they often deal in cash, be self-employed or just starting their careers.
Industry leaders such as Fannie Mae are realizing these differences among borrowers and adjusting mortgage products and loan approvals to meet the needs of today’s homeowner. An example is Fannie’s HomeReady mortgage product.
HomeReady is designed to help lenders serve today’s market of credit-worthy, low-to-moderate income borrowers by expanding eligibility for financing homes in designated low-income, minority, and disaster-impacted communities. The product allows for a 3 percent down payment, flexible sources of funds for the down payment, and closing costs with no minimum contribution from the borrower’s own funds, among other benefits.
Will lenders be willing to adjust their underwriting criteria so that it doesn’t exclude well-qualified Hispanic buyers?
To be sure, Hispanics will drive U.S. housing demand for the foreseeable future, especially in places such as Texas and its metros. It’s imperative that the housing industry find responsible ways to successfully convert them to homeownership without putting undo risk on the nation’s financial systems.
Marcus McCue is the executive vice president of Guardian Mortgage Company.