Insights Into the Minority Home Buying Experience

Title: Insights Into the Minority Home Buying Experience

Date: 5/1/2003

Author(s): Theodore Reed

Executive Summary:

Under a cooperative agreement with the U.S. Department of Housing and Urban Affairs, the Mortgage Bankers Association of America commissioned the firm of ReedHaldyMcIntosh to conduct focus groups to improve our understanding of the mortgage application process in the African American and Hispanic communities. The sessions were held in Chicago, Illinois in January of 2003. Four separate groups were convened, with high- and middle-income sessions for both minority groups. While the conclusions of the focus groups stand alone as helpful insights into the minority experience in home mortgage markets, the results from the focus groups also helped inform the design of a major survey of mortgage search behavior to be conducted under the cooperative agreement.

The Research Institute for Housing America sponsored a special report highlighting the main findings of the focus group. A copy of the report in PDF form may be obtained by clicking the "Open File" link in the upper right hand corner.

The report highlights five issues that came to the fore during the focus groups. 1) Participants from both communities identified the difficulties with credit, credit history, and financial management as major barriers to success in the mortgage application process. 2) Lack of experience and knowledge about mortgage loans and the mortgage application process were a key issues for many participants. 3) The prequalification process was not well understood, and many participants stressed the importance of a realistic assessment of one's own financial capabilities as an input into a satisfactory outcome. 4) A recurring theme was the desire to find hands-on help to smooth the application process. 5) The typical minority mortgage applicant did not actively seek competitive bids to obtain the best deal possible; the primary concern is getting the application approved.

In general, the report suggests that participants in the higher income groups were more successful in overcoming barriers and were more comfortable with the process. However, almost all felt that real estate agents, lenders, and their local governments were, or could be, important players in improving the process ... mainly by providing resources to assist prospective minority homeowners.