In recent years, the landscape of mortgage lending has evolved to become more inclusive, aiming to provide equal opportunities for all borrowers, regardless of their sexual orientation or gender identity. However, disparities still exist in the mortgage lending process for LGBTQ+ borrowers.
This article explores the current state of LGBTQ+ mortgage lending, highlighting key statistics, challenges faced by LGBTQ+ borrowers, and the progress being made toward more equitable lending practices.
Homeownership and Renting Rates
LGBTQ+ adults are less likely to own homes compared to their non-LGBTQ+ counterparts. According to recent data from the Urban Institute, approximately 51% of LGBTQ+ adults own homes, compared to 71% of non-LGBTQ+ adults.
At the same time, 46% of LGBTQ+ renters fear discrimination in the home-buying process, according to the National Association of Gay and Lesbian Real Estate Professionals (NAGLREP). However, just 13% report experiencing discrimination when purchasing a home.
LGBTQ+ people have specific mortgage needs, as they’re more likely to rent (41% compared to 25% of non-LGBTQ+ adults), and they’re more likely to face discrimination when searching for housing. 54% of NAGLREP members state that gender and sexual orientation minorities need more education about what it takes to get a residential mortgage loan.
According to the Federal Reserve Bank, median US home prices have reached $420,800 in the first quarter of 2024, slightly down from the fourth quarter of 2023 when prices peaked at $423,200. There was a significant decrease in the total volume of homes sold in the first half of 2024; sales fell by 5.4% from last year, showing that the economy is shifting to a buyer’s market.
After record low mortgage rates during the pandemic, inflation has brought significant rises in interest, though lower mortgage rates may be on the horizon in the third quarter of this year. Still, with the Fed interest rate reaching 5.50% in June of 2024, everyone considering a purchase should become familiar with what it takes to navigate different mortgage lenders and loan terms.
Let’s see what the mortgage process looks like for LGBTQ people, what kind of homes they are buying, and what the numbers say about discrimination in the primary mortgage market.
LGBTQ+ Borrowers and Mortgage Statistics
According to a report by the National Association of Realtors (NAR), lesbian and gay people were generally similar to non-LGBTQ individuals in the mortgage loans they sought. Mortgage statistics found some differences for bisexual individuals, as they spent significantly less and made offers on more affordable homes compared to other groups.
These distinctions were partly due to age, as the typical bisexual home buyer or seller was younger (34 years old), compared to 45 for lesbians and gay men and 46 for non-LGBTQ individuals.
The statistics discussed below come from studies conducted by NAR and the National Community Reinvestment Coalition (NCRC).
LGBTQ homebuyers are more likely to finance their home with a mortgage
Mortgage lending statistics show LGBTQ people were more likely to finance their home with a mortgage. While over 80% of all people studied, regardless of sexual orientation and gender identity preferred a fixed-rate mortgage (87%), bisexual individuals were the most likely to seek a residential mortgage with a fixed interest rate.
Bisexual borrowers are the most likely to use FHA and VA loans
Besides being more likely to use Veterans Affairs and Federal Housing Administration loans, bisexuals across all age groups were more often first-time purchasers, reported lower incomes, and were predominantly single females. Additionally, bisexuals consistently spent less on the homes they purchased, irrespective of their age.
LGBTQ buyers were more likely than cishet buyers to use FHA loans
Non-LGBTQ and bisexual individuals were more likely to have utilized VA loans compared to lesbian, gay, and other LGBTQ people. Bisexual individuals were the least likely to use conventional loans.
Gay and lesbian buyers were more likely to use conventional loans
Compared to bisexual individuals, lesbian and gay purchasers were more likely to purchase a home with a conventional loan. They are also the least likely group to have used VA mortgage loans to purchase their homes.
LGBTQ couples were more inclined to seek loans from mortgage companies rather than banks or credit unions
According to the National Community Reinvestment Coalition, same-sex couples are more likely to borrow money from mortgage companies. Compared to 52% of different-sex couples, 64% of same-sex female couples, and 60% of same-sex male couples sought mortgages from mortgage companies.
Same-sex female couples were less likely to have middle or upper-income levels
79% of same-sex female couples were in this category, while 21% belonged to the moderate-to-low-income homebuyer category. In contrast, 87% of different-sex couples were middle-to-upper income, and male same-sex couples came in at 85%.
Same-sex couples often pay higher closing costs and higher interest rates
According to Home Mortgage Disclosure Act data analyzed by NCRC, factors like lower down payments, lower credit scores, or discrimination in the loan process likely caused these higher costs for same-sex couples.
Regardless of lender type, same-sex couples pay a premium rate spread when compared to different-sex couples
Data on loan originations shows that same-sex female couples pay a rate spread 28% higher when using a mortgage company, and 62% higher than different-sex couples when borrowing with a bank.
Same-sex couples were more likely to borrow for a purchase than to refinance for home equity
Compared to different-sex couples (52%), same-sex couples are more likely to visit mortgage lenders for home purchases (65-67%). They were also more likely to purchase homes in lower-income and more diverse neighborhoods, more likely to be younger, and less likely to be white.
Bisexual homebuyers were more likely to make a compromise on their home
Compared to other groups, bisexual purchasers were most likely to make at least one compromise, including choosing different geographic areas (also influenced by age), smaller homes (25% made the compromise), and the quality of the neighborhood (15%).
Lesbians and gay men were the least likely to make any compromise on the home they purchased
Of this group, 25% were single males. Lesbian and gay men are also more likely to be white and less likely to have children. They also have higher incomes compared to bisexual individuals, focusing more on the quality of the neighborhood and the home’s proximity to entertainment and leisure activities.
LGBTQ homeowners were more likely to have higher monthly mortgage payments
Data from 2021 shows that more than half of LGBTQ homeowners (54.5%) reported paying over $1,250 a month for their mortgages, compared to 45.5% of non-LGBTQ households.
According to a report from the Center for LGBTQ Economic Advancement & Research (CLEAR), LGBTQ adults in metropolitan and non-metropolitan areas paid more for their mortgages than their non-LGBTQ peers.
Compared to cishet buyers, LGBTQ buyers tend to purchase older and smaller homes
Data on home sales shows that LGBTQ+ consumers purchase smaller and older properties. The median property purchased by LGBTQ people has an area of 1,730 sq. ft. and was built in 1977. The typical property for cishet owners is 1,900 sq. ft and was built in 1992.
Bisexual home buyers typically purchase older and smaller homes compared to all other groups
The median size of a home purchased by a bisexual buyer is 1,600 sq ft, and the median year is 1974.
LGBTQ+ individuals are less likely to be married compared to straight and cisgender individuals, which can impact their likelihood of owning a home
This is particularly evident when looking at dual-income households where marriage often correlates with higher rates of property ownership. The exclusion of same-sex couples from legal and financial benefits until recent times further exacerbated this gap.
However, according to the Urban Institute, home purchase rates among single individuals, regardless of gender identity or sexual orientation, are similar, even after factors like age, salary, or education were taken into account.
Overall, LGBTQ+ people are younger than the cishet population
The LGBTQ+ population skews younger compared to the non-LGBTQ+ population, with 52% of LGBTQ+ individuals being under 35 years old, while only 23% of straight and cisgender individuals are in the same age group. This makes them less likely to purchase real estate, as the housing market is generally unfavorable to younger people.
LGBTQ+ Discrimination by Mortgage Lenders
Dillbary and Edwards analyzed over 5 million mortgage applications backed by the Federal Housing Administration and found significant disparities in approval rates based on sexual orientation and race.
Same-sex male applicants are less likely to be approved for a mortgage
Mortgage lenders are less likely to approve a home loan for same-sex male applicants, regardless of their race. This was true even when factors such as lender, county, loan amount, loan purpose, applicant income, and risk level were controlled for.
The impact of race on mortgage originations is significant for all couples
The findings of a UCLA Williams Institute study highlight persistent discrimination in mortgage lending based on sexual orientation and race, even for FHA-insured loans that carry limited risk to lenders:
Black-male pairs – They are the least likely to have their mortgage loans approved, with a 7.5 percentage point lower approval rate compared to white heterosexual couples.
Interracial pairs – Black male and white male pairs had a 6.8 percentage point lower approval rate, white male and black male pairs had a 4.3 percentage point lower rate, and white male pairs had a 2.5 percentage point lower rate.
Female pairs – The same pattern was observed for female pairs, with black female pairs being the least likely to be approved, followed by interracial female pairs, and finally, white female pairs.
Access to mortgage financing is crucial for purchasing real estate, but the literature on LGBTQ+ experiences in lending is limited because lenders don't collect data on applicants' sexual orientation or gender identity.
They do collect gender data, allowing comparisons between same-sex and different-sex individuals. Available evidence suggests that same-sex couples face discrimination in mortgage lending, contributing to lower property ownership rates among LGBTQ+ individuals.
Discrimination can be explicit, like a same-sex couple being asked to leave a bank because of an alleged policy against lending to same-sex couples. However, a lack of research often makes this type of discrimination difficult to detect.
Same-sex borrowers had 3% to 8% lower approval rates compared to different-sex borrowers with similar profiles
After analyzing the Home Mortgage Disclosure Act (HMDA) and Fannie Mae data on mortgage originations, the Williams Institute study found that same-sex borrowers had a 3% to 8% lower approval rate compared to different-sex borrowers with similar profiles.
Same-sex borrowers were also charged slightly higher rates and fees
Same-sex borrowers were charged 0.02% to 0.2% more in mortgage rates and fees, equivalent to a total outstanding mortgage debt of $8.6 million to as much as $86 million annually. Regardless, mortgage lending statistics show there are no significant differences in risk levels between LGBTQ and cishet borrowers.
The Bottom Line
Similar to the general population, LGBTQ+ homebuyers most frequently use conventional loans. However, some subgroups within the LGBTQ+ community, such as bisexual homebuyers, are more likely to use VA loans or FHA loans compared to other LGBTQ+ and non-LGBTQ+ purchasers. This trend reflects a preference or necessity for loan types that may offer more flexible qualification criteria or lower down payment requirements.
The data also highlights significant disparities and challenges faced by LGBTQ+ individuals in mortgage lending. From facing discrimination in loan approvals and higher interest rates to purchasing older and smaller homes, the journey towards owning a home for LGBTQ+ individuals often involves navigating complex hurdles.
Despite these challenges, there is hope for progress. Increased awareness of these disparities can lead to advocacy for fair lending practices and policy changes that promote inclusivity. Financial institutions and policymakers can work towards implementing measures that ensure equal access to real estate for all, regardless of sexual orientation or gender identity.
Ultimately, addressing these issues not only benefits LGBTQ+ individuals but also contributes to creating a more equitable and inclusive housing market for everyone.
If you’re ready to start the homebuying journey, Pride Lending is here to help. Our team is made up of allies and members of marginalized communities, which includes LGBTQ+ and BIPOC mortgage professionals with years of experience. We’ll help you determine what you can afford and match you to the right lenders for your needs, including a good loan term and inclusive policies.
While it’s recommended that you provide at least a 20% down payment to remove private mortgage insurance and access the best rates, we know that’s not feasible for everyone. As such, we’ll help you take advantage of down payment assistance programs from local, state, or national organizations that will make up the difference and help you afford these major upfront expenses.
Join the millions of happy homeowners across the country by working with Pride Lending. Contact us today at 725-231-0192 to begin this exciting new phase of your life!
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