If you are a single woman looking to buy a new home, you will want to read this.
Even though single women statistically default on their mortgages less often than men, they are denied credit more often and get charged more for their loans. In addition, even though single ladies typically make larger down payments according to the Housing Financing Policy Center of the Urban Institute, they typically have lower incomes.
Single women are one of the largest group of homebuyers in the marketplace, averaging about 15-20 percent of home purchases. Second only to married buyers with a 67 percent buying average and men only accounting for about 9 percent of home purchases.
In The Urban Institute study they looked at a national database of mortgage transactions compiled by the federal government as well as proprietary information on borrower-credit characteristics from an analytics firm.
The study revealed single women pay slightly more for their mortgages in spite of their superior repayment record. Some of this attributed inequality is because of “weaker credit characteristics” at the application stage resulting in subprime, or higher-cost, financing.
The authors argue that in fairness, “we need to develop more robust and accurate measures of risk to ensure that we aren’t denying mortgages to women who are fully able to make good on their payments.” As the pattern of lower default rates by single women borrowers remained persistent throughout all three years of the study period.
Real estate agents say single women are more emotionally invested when buying a condo or a house and are buying to fulfill a dream. Whereas men are more interested in the tax write-offs and financial gains.
But the more disturbing factor is that single women are simply paying too much for their home loans. The Urban Institute study attributes this to “Given that more than one-third of single women borrowers are minorities and almost half of them live in low-income communities.”
However, the 2011 Journal of Real Estate Finance and Economics doesn’t believe gender discrimination is to blame: “While the persistence of gender disparity may suggest discrimination, we offer a different explanation: Women pay higher rates because they are more likely to choose lenders by recommendation, while men tend to search for the lowest rate.”
What does this mean? It could mean thousands of dollars in extra payments for women on a 30-year mortgage. A man pays $26,000 less than a woman in interest over the life of the assuming he gets a 5% mortgage rate while she gets a 5.4% rate.
So ladies you may not always be able to get a better price on a mortgage but it is most certainly worth a shot. Do your homework and double-check those referrals by comparing interest rates online through websites like LendingTree.com.