In 2023, about a third of Native American mortgage applications in Arizona were denied, a rate nearly four times higher than that of white applicants, according to a Zillow analysis of federal data.
Why It Matters
Experts highlight that persistent financial barriers, coupled with high interest rates and inflation, are preventing many would-be buyers of color from achieving homeownership, a critical American wealth-building tool.
By the Numbers
- Denial Rates in 2023
➙ Native American applicants: 32%
➙ Black or Latino applicants: 16%
➙ White applicants: 8%
Broader Context
This trend is not unique to Arizona. Nationwide, higher denial rates are seen among Black, Indigenous, and other people of color, according to Zillow's senior economist Orphe Divounguy.
Key Insights
- Credit History: The primary reason for denial among Native American applicants in Arizona was a lack of credit history.
➙ Mortgage lenders require a history of on-time payments on auto loans, credit cards, or other loans to assess borrower reliability.
➙ Indigenous Arizonans, especially those living on reservations, often have less access to banks and financial services, making it difficult to build credit.
- Debt-to-Income Ratio: For other Arizona applicants, a high debt-to-income ratio was the most common reason for denial.
➙ Rising credit card and auto loan delinquency rates indicate that inflation and high interest rates are straining middle-class families.
Expert Opinions
Urban Institute senior fellow Michael Neal attributes many of these denials to structural racism and discrimination, which have historically prevented some minority groups from having the income or assets needed to qualify for a loan. "A whole community is being excluded from that part of the financial system," Neal said.
Noteworthy Statistic
Homes owned by Native Americans in Arizona are valued about 20% lower than the average home, according to Zillow's analysis.
Equity Challenges
Even when Arizonans of color manage to buy homes, they often build less equity than white homeowners. This is because the neighborhoods where they reside typically receive less public and private investment and have fewer amenities, Divounguy noted. "Even if you manage to get on the homeownership ladder, these disparities tend to exist," Divounguy said.
To Conclude
The disparities in mortgage application approvals reflect deeper issues of access and equity within the financial system. Addressing these challenges is crucial to ensuring that all communities have equal opportunities to build wealth through homeownership.