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Removing Barriers to Asian American Homeownership

by Amy Kong

Removing Barriers to Asian American Homeownership

Did you know the homeownership rate among Asian Americans is just under 60%? Compared to 74% of White Americans’ owning a home, that is a startling gap.

When you break the Asian American community down into country-specific groups, the homeownership rates range from 55% to 30%. Clearly, a huge gap exists for many in the AAPI community.

As a real estate agent working with clients eager to achieve the American dream of owning their own home, I can tell you that it may be helpful to understand some of the barriers Asian Americans face. Three significant factors are incomplete credit applications, language access and down payments.

Thin, Clean Credit Files Lead to Incomplete Credit Applications

When they do have credit scores, Asian American borrowers have the highest median credit scores overall and across most enhanced loan types. However, AAPI families often prefer to make their purchases in cash at the time of purchase and avoid debt, making large purchases only when cash is available. Therefore, AAPIs historically have struggled with credit qualification as a result of their limited credit history. In addition, antiquated underwriting standards do not favor the self-employed entrepreneurial AAPI buyer.

Limited credit history is one of the top reasons for AAPI application denial, despite their having the lowest delinquency rate of any group. A potential solution is the introduction of alternative credit scoring models. Requiring lending institutions to consider other forms of credit in their credit scoring models would open up greater access to housing finance for well-qualified but “credit thin” AAPI homebuyers.

In-Language Access Proves a Barrier

A survey found that Limited English Proficiency (LEP) speakers favor in-language documents, with Chinese, Korean and Vietnamese speakers more likely to want both in-language and English resources. A major challenge, however, is the translation of certain terms, especially financial terms, that do not directly translate. Another is that many LEPs do not trust the quality of the translation of the documents unless they are done by a government agency, a large bank with name recognition or a smaller bank with someone who speaks the same language.

Adding the preferred language question back to the Uniform Residential Loan Application (URLA) is one way to limit this barrier. This would allow the Federal Housing Finance Agency (FHFA) the ability to properly assess the language needs of AAPI borrowers. AREAA has successfully collaborated with the GSEs to create translated resources in Chinese for LEP borrowers. Korean, Vietnamese and Tagalog are set to launch this year, but further expanding the FHFA’s clearinghouse to serve more AAPI LEP languages is needed. Other solutions include implementing a language access line that enables borrowers to obtain assistance in their preferred language.

Down Payments are Disproportionately Higher in Areas Popular with AAPIs

Members of the AAPI community need more time to save for a traditional 20% down payment, mainly because they live in high-cost metro areas.

For “mortgage ready” AAPIs:

Race/Ethnicity                    Monthly Income                   Median House Price (SFH)

Non-Hispanic Whites        $4,326                                     $243,076

African Americans              $3,679                                     $215,774

Hispanics                              $3,588                                     $349,351

AAPI                                       $4,306                                     $444,307

Down payment assistance programs could make AAPI homeownership more feasible in high-cost areas.

More than One

Another initiative that may support increased homeownership is education. Through a new educational video series called “More than One,” we are trying to dispel the myth that Asian Americans are a monolithic group and showcase that a huge variety of ethnicities exist with the AAPI community.

Through interviews with AREAA members of different nationalities, real estate professionals can learn more about individual AAPI groups, their home countries and how each group values homeownership.

Change is on the Horizon

The barriers to AAPI homeownership may be high, but the solutions are apparent. Concerted effort and advocacy is needed to ensure solutions are put into place to afford greater access to the American dream for the more than 18 million AAPI members.

AREAA is fully engaged in these efforts, and we are confident that we will see changes to support increased homeownership for the next generations.

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