Home shoppers have way more options when it comes to applying for a Mortgage in the US. But when it comes to choosing whether you should buy your mortgage in person or shop online, more and more people are choosing to go the digital route for their home loan needs. Why? Because it’s seen as a quicker and easier choice. Now there’s another good reason to opt for a digital mortgage. According to the National Bureau of Economic Research”s report “Consumer-lending Discrimination in the FinTech Era,” discovered minority borrowers are facing less discrimination and lower interest rates when they opt for an online mortgage. This trend is based on the increased number of people going with digital mortgage solutions, which in turn is pushing down discriminatory practices when it comes to home borrowing.
According to NBER, right now Black and Latin borrowers can generally expect an interest rate that is 0.79 % higher for first-purchase home mortgages when working with face to face lenders compared against other borrowers. While the number may seem disappointing, when it comes to racial discrimination in the US mortgage industry, it’s actually a bit of an improvement. Black and Latin borrowers back in 2009 were seeing interest rates close to 1.25% higher as compared to other ethnic communities when opting for a traditional mortgage.
The change can be attributed to home buyers preference for shopping for their mortgages online as opposed to traditional face to face interviews. When it comes to digital mortgages or app-based borrowing, Black and Latin homebuyers pay 0.53 % more interest compared to other communities which is just over a quarter of a percent down when compared to face to face lending. Refinancing is no exception and also is cheaper online for Black and Latin communities in America.
According to NBER’s research, “Fintech algorithms discriminate approximately 40% less than traditional face to face lenders. When it comes to loan rejections, the data shows that in-person lenders reject minority applicants roughly 6 percent more often than non-minority applicants, while algorithmic lenders show no difference in loan rejection decisions.”
Rocket Mortgage pioneered one of the first online mortgage solutions that could get you conditional preapproval in a matter of minutes. They turned the lending industry on its head when they announced last year that they were the largest home lender in America! Quicken’s Rocket Mortgage was the clear winner with the largest-volume mortgage product in the US market in 2018. Other lenders decided quickly to get in on the online mortgage buying action, forty-five percent of the country’s largest mortgage lenders now offer online or app-based loans.
Digital Mortgages decreasing Discrimination Against Minority Borrowers
So if you’re looking to find the best mortgage rate out there, don’t forget to check out the numerous mortgage options out online. Because according to the National Bureau of Economic Research, shopping online for your mortgage, just might be the safest bet!