In 1920, women won the right to vote with the adoption of the 19th Amendment to the U.S. Constitution. In 1929, English writer Virginia Woolf published her landmark essay, A Room of One’s Own, which addressed the many injustices women suffered at the time. But it wasn’t until 1974 that the U.S. Congress expanded the Fair Housing Act to outlaw discrimination against women in buying a home. Until then, banks could require women to have a male cosigner to get a mortgage.
Today, single women surpass single men in owning homes—11 million versus 8.3 million, per U.S. Census data. Even in this tough housing market, more women than men (20% versus 16%) seriously considered buying a home in the past year, a Fannie Mae consumer survey found. And years of research show women especially cherish the security of owning the roof over their families’ heads.
Yet, women continue to face disparities in income, savings, and wealth and struggle with down payments. Additionally, more women than men are single parents who shoulder childcare costs or care for aging parents.
Meeting women’s demand for homeownership is an investment in women that benefits families, communities, and economies. For lenders, seeing and serving women homebuyers is an untapped industry growth opportunity.
First, we must demystify—and simplify—the mortgage process, which can be especially daunting for historically overlooked, underserved, and less experienced groups.
Our survey found that 52% of women think it will be difficult to obtain a mortgage and only 35% feel confident going through the process. They’re far from alone—only 45% of all consumers feel confident going through the mortgage process.
Moreover, some 30% of consumers, including women, are unaware of the minimum down payment for a typical mortgage. Others assume the old gold standard of 20% down when 3% to 5% down payments with the right credit and debt-to-income ratio are commonplace. Nearly a third don’t know or greatly over- or underestimate the required minimum credit score.
Expanding homebuyer education and information would help women and society. But that’s not enough. We need to dig deeper.
For instance, an estimated 50 million people in America are “credit invisible.” Many haven’t interacted with the credit system or have little or no credit files. Yet many may be mortgage creditworthy and not know it—like renters who’ve consistently paid their landlord on time like they would a mortgage or self-employed entrepreneurs with consistent but nontraditional incomes. Many are women who’ve faced gender discrimination.
The good news is that fresh thinking and harnessing data tech and analytics can power lenders to identify and qualify the hidden creditworthy homebuyers. For instance, Fannie Mae is asking our rental property landlords to share their tenants’ timely rent payments with credit agencies, so their credit scores reflect their largest monthly payment. We’re also “teaching” our underwriting system to look at overall monthly cash flows to identify on-time rent payments, as well as nontraditional sources of income (rather than simply paychecks).
This seems to work. Of the 450,000 renters enrolled in our rent-reporting pilot, two-thirds who started without any credit score gained a credit score of 660 or higher within six months, our lead vendor reports. Those with an existing score boosted it by 35 points on average.
Mortgage innovations can open doors for women homebuyers. Single women are the largest group of apartment renters and outnumber single men in the overall rental market—so factoring in their rents could boost their credit qualifications. Over the past five years, the number of women-owned businesses has grown at nearly double the rate of businesses owned by men. Women business owners without credit scores could thus get a boost when we look at their real cash flow. Late last year, Fannie Mae also provided lenders with an income calculator that simplifies the process of qualifying self-employed borrowers.
Ninety-five years ago, Virginia Woolf made the point that “a woman must have money and a room of her own if she is to write fiction.” She would be pleasantly surprised that today, women having a whole house of their own is not only commonplace but a key driver of the housing market. Making the mortgage process easier and more accessible for women and all homebuyers is in the housing industry’s—and our nation’s—best interest.
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