student loan debt

Bringing Financial Wellbeing To The Black Community

In honor of Black History Month, we’ve examined the racial disparity in homeownership and ways for the fintech, finance, and mortgage industries to improve Black Americans’ homeownership rate.

Homeownership is the primary way that American families accumulate wealth. Yet to attain the American Dream, Black Americans must overcome a disproportionate burden of student loan debt, a lower salary to help pay down the student loan debt, a lack of financial education, and inequality in the mortgage process.

The Disproportionate Burden of Student Debt

Student debt is the foremost hurdle facing most first-time homebuyers. It is also the primary reason that delays 76% of consumers from buying their first home. However, the student debt crisis has disproportionately impacted black borrowers and saddled black students with the most debt.

Black Americans borrow money for college at a higher rate than any other group: 86.8% of black students at public four-year colleges borrowed federal loans compared with 65% of Latino students and 65.9% of white students, according to the National Center for Education Statistics.

Black students with bachelor’s degrees owe $7,400 more student debt ($23,400 versus $16,000) on average upon graduation than white graduates, according to Brookings. Differences in interest accrual and graduate school borrowing lead to black graduates holding nearly $53,000 in student loan debt four years after graduation—almost twice as much as their white counterparts.

Black college graduates ages 21 to 24 earn $3.34 less per hour than their white peers, according to MarketWatch, despite holding similar qualifications and experience levels. That $7,000 annual difference negatively impacts their ability to pay down student debt.

Overcoming The Hurdles To Qualify For A Mortgage

Homeownership is often a more financially stable housing option than renting because it allows families to have more predictable housing costs. Yet, most Black families rent their homes, and the homeownership gap between Black and White Americans is growing wider.

The Fair Housing Act was passed in 1968 to open up opportunities for Black Americans to become homeowners by making it illegal to discriminate against any person from buying based on race and other protected classes. It eventually worked, when Black homeownership peaked at 69% in 2004 and 2005. However, numbers dropped following the 2008 housing crisis and haven’t recovered.

In Q3 2020, the percentage of Black Americans owning a home was 46.4%. It is 75.8% for non-Hispanic white alone householders. According to NAREB 2020 State of Housing in Black America, the homeownership rate for Black Americans who graduated from college is only 3.2% higher than that of White high school dropouts.

Lenders deny mortgages for Black applicants at a rate 80% higher than that of White applicants, according to 2020 data from the Home Mortgage Disclosure Act.

Black borrowers who do overcome the hurdles of mortgage qualification often pay higher rates for FHA-backed loans and conventional mortgages. According to the National Association of Real Estate Brokers, Inc. 2020 State of Housing in Black America report, in 2018, 53% of Black mortgage borrowers obtained FHA or VA loans, compared to 23% of White borrowers. Only 5% of the conventional market were loans to Black borrowers, compared to 15% of the FHA/VA market.

Reducing the Gap in Homeownership

To reduce discrimination and improve the homeownership rate for Black Americans, the Urban Institute made these recommendations in its report, Building Black Homeownership Bridges: A Five-Point Framework for Reducing the Racial Homeownership Gap:

  • Improve and expand financial education, housing counseling, and homeownership preparation to renters and younger generations
  • Helping Black renters gain access and understanding of homeownership tools at an earlier age
  • Explore more options for the use of fintech to advance understanding and access to homeownership
  • Encourage savings as money in the bank can alter a borrower’s subsequent probability of default
  • Increase visibility and access to down payment assistance and low-down payment lending programs
  • Expand small-dollar mortgages for purchase and renovation
  • Consider diverse sources of income to qualify for a mortgage
  • Strengthen post-purchase counseling
  • Tools to monitor real-time home values and home equity

Homeownership Can Provide The Black Community With Financial Wellbeing

Homeownership is the primary way that American families accumulate wealth. Wealth, when defined as the difference between what people own and what they owe, provides immediate financial security and long-term economic mobility. During an economic crisis, such as the current pandemic, families with wealth are more likely to have emergency savings to pay their bills if they’ve had their work hours reduced or experienced a permanent job loss.

According to the 2019 Survey of Consumer Finances, the typical White families’ home value is $230,000, yet the typical Black families’ home value is $150,000. Wealth is often passed from one generation to the next, whether through inherited wealth, financial education, or down payment support. Black families have fewer financial opportunities to give their children because the primary asset that drives wealth is difficult to attain and, once achieved, has a lower value, leaving them with less wealth to distribute.

FinLocker provides all users with the tools and educational resources achieve financial stability through homeownership. Putting a transparent, tech-driven financial solution into all consumers’ hands can help address the racial disparity in homeownership and wealth creation.

Here are some organizations that can provide additional resources:

National Association of Minority Mortgage Bankers of America (NAMMBA) – Supports minorities and women who work in the mortgage industry with education and career development. Currently focused on connecting 50,000 college students to positions within the real estate finance industry. #StudentChallenge.

Cultural Outreach – Focused on helping financial institutions and mortgage lenders connect with young and underserved markets. Here’s their Lender Resources.

LoanSense – Identifies federal loan programs and government subsidies to reduce student loan payments. The savings can help the borrower increase their homebuying budget. LoanSense knows how different loan programs handle student debt, so that they can recommend to the referring loan originator the best loan program for their borrower. Use the LoanSense Purchasing Power Tool to see how reducing student loan payments can increase a consumer’s home budget.

5 Ways To Fill Your Pipeline With Millennial Homebuyers

At the conclusion of 2019, prior to the Coronavirus changing the way we live and work, Millennials – those born between 1981 and 1996 (turning 25 to 40 in 2021) – had a 47%1 share of primary home loan originations of the market.

As 2020 progressed, and office workers began working from home, with many arrangements now becoming permanent, Millennials seized on the opportunity provided by low rates to stop renting in expensive cities and purchase a home in an affordable suburban neighborhood or small town.5 This change has seen the year ending with Millennials now making over 60% of the home purchases.2

In 2021, a significant wave of millennials will be 30-353, the prime homebuying age for first-time buyers. How do you fill your pipeline with Millennial homebuyers and position yourself to capture their repeat business and referrals? Here is what we know about this group of homebuyers and how a custom-branded FinLocker can turn loan originators into trusted advisors with customers for life.

1 – Millennials are struggling to save for a down payment.

Student loans, car loans, credit card debt, and increasing rents make it difficult for most homebuyers to save for a down payment. Debt delays 75% of buyers aged 22 to 29 from saving for a down payment or buying a home for 1-3 years, and 48% of buyers aged 30 to 39 years are delayed 5 or more years.4 Yet for 85% of buyers aged 22 to 29 and 72% of buyers aged 30 to 39, their savings is the primary source for their down payment.4 To become a homeowner, Millennials first need to learn to manage their debt and start saving.

How FinLocker can help Millennials save for their down payment:

The FinLocker financial super-app provides practical budgeting and saving tools to keep Millennial homebuyers focused on their homeownership journey. Whenever there’s a change to their credit score, they keep their budgets on track (or get off track), and make progress towards achieving their savings goals, users will receive a notification through the FinLocker mobile app.

2 – Millennials are burdened by student debt.

According to the National Association of Realtors, 76% of consumers claim student debt impacts their ability to purchase a home5; 38% of homebuyers aged 30 to 39 years have student debt with a median amount of $34,000.4

Student debt often affects a homebuyer’s debt-to-income ratio, contributing to a low credit score. These two factors were cited by 55% of buyers aged 22 to 29, and 67% of buyers aged 30 to 39 as the reason their mortgage application was rejected.4

How FinLocker can help Millennials overcome their student loan debt:

Rather than turn away over half of your Millennial clients for not being mortgage ready, nurture them with a FinLocker. When your clients enroll their credit and debit accounts, the FinLocker Spending Analysis will categorize each transaction to identify where they can cut back on spending, pay down their student debt and credit cards, and begin to save for their down payment. With regular engagement, FinLocker customers will start to see their credit score improve and their debt-to-income ratio lower.

3 – Millennials are tech-savvy and expect their homebuying vendors to be, too.

Millennials are keenly aware of the convenience of online shopping, digital tools, and apps. They expect the vendors involved in their home buying transaction to provide the same convenience. The first step of most millennial homebuyers as they begin the home buying process is to look online for properties for sale (43%), followed by looking online for information about the home buying process (17%), with few (7%) contacting a bank or mortgage lender first.4

How FinLocker can help you to attract and engage tech-savvy Millennials:

Target your online marketing to Millennial homebuyers who are early in their homebuying process. Promote the offer to give first-time homebuyers a free financial super-app, aka your custom-branded FinLocker, to every new client that gets pre-qualified. Once they are pre-qualified and you’ve identified any impediments to them purchasing a home in the short term, invite your clients to create a FinLocker to interact with the app’s financial tools to correct the barriers you identified.

4 – Millennials need assistance overcoming the most difficult steps of the home buying process.

Millennial homebuyers in 2020 cited “finding the right property,” “paperwork,” “understanding the process and steps,” and “saving for the down payment” as the four most difficult steps of the home buying process. What’s more, 63% of Millennials found the home they purchased on the internet.4 The internet is filled with websites that Millennials can use to obtain homeownership education, but if they stumble across the lead gen resources created by your competition, how likely are they to return to you for their mortgage?

How FinLocker can help Millennials get mortgage ready:

A custom branded FinLocker will help you remain top of mind with your borrowers as they engage with the app to address each step in the home buying process. When they’ve saved their down payment and have taken the readiness assessment, they can begin their Property Search in the app. FinLocker also provides secure Document storage, so the homebuyer can securely transfer their financial documents and assets to their loan officer when they are ready to complete their mortgage application.

5 – Millennials can be a top referral source.

An investment in customer satisfaction is an investment in your company’s future. Satisfied clients are more loyal and will be the promoters of your business. In 2020, 87% of consumers began their lender search with a referral or an existing relationship.6 How will you become the mortgage lender your clients recommend to their homebuying friends and colleagues? Stand apart from the competition by becoming a trusted advisor who provided your Millennial clients with the financial tools to improve their credit score, help them save for their down payment, and ultimately increased their purchasing power.

How FinLocker can help your Millennial homebuyers become customers for life:

Client engagement with your custom-branded FinLocker doesn’t end at the closing table. Homeowners can continue engaging with their FinLocker indefinitely as they save for future home repairs, build an emergency fund, and plan to achieve their next financial goals. As the provider of this useful financial tool, you’ll remain their lending contact, keeping you top-of-mind when they are asked for a referral to their mortgage lender.

To find out how a custom-branded FinLocker can be used to attract more Millennial clients to your loan officers, contact us to schedule a demo.


1, Q4 2019 Generational Propensity Report: Generation Z Enters the Housing Market
2 Ellie Mae, Ellie Mae Millennial Tracker
3 Deloitte Insights, U.S. Census Bureau International Demographics via Haver Analytics
4 National Association of REALTORS®, 2020 NAR Home Buyer and Seller Generational Trends
5 National Association of REALTORS®, The Impact of Financial Literacy on Homeownership: Student Loan Impact
6 STRATMOR Group, How to Become the Mortgage Lending Choice of Millennials

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