According to the New York Times, a recent study found that minority borrowers and those with less education paid higher fees for their loans. The 270 page report, which was compiled for the US Department of Housing and Urban Development (HUD), studied nearly 8,000 mortgage loans and concluded that college-educated borrowers paid over $1,000 less than those without a college education.
The study’s author, former HUD economist Sarah E. Woodward, guessed that lenders quoted lower fees to better-educated borrowers because they believed that these prospective borrowers were more likely to shop around or had a better idea of what fees they should be paying for the kind of loan they were getting.
So how does this information benefit you? That’s easy. By shopping online you maintain some privacy — your quote can’t be swayed by any impression of your education, race, gender, or other factors. And the fact that you are online in the first place means it’s likely that you have a certain level of savvy and that you are clearly shopping; both are factors which should motivate your lenders to give you a fair and competitive quote.
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(26 votes, average: 4.77 out of 5)
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I think the most important thing to get out of this post is that the lender can do this. There isn’t a set fee across the board and if they have any prejudice whatsoever, they can act on it. This is a great post, thanks for bringing this subject to life.
I’ve seen questions asking information about race and gender on online applications. Are these fields optional and would it be smarter to omit this type of information when filling out an online mortgage applications?
Hi joan, I think we need to put it into some perspective; studies on car salespeople show that quoting differently isn’t usually deliberate — more unconscious behavior. Obviously, successful salespeople want to do busines and behavior that costs them business would be stupid. That doesn’t make us feel any better when we get treated differently though — I race cars and guys often treat me differently without realizing it.
Liz, I’d leave the demographic data off an online application but fill it in when closing the loan at the title company. In person, the lender is required by law to complete it if you don’t. The data goes to HUD and is actually used to see if discrimination in approvals or fees exists. It’s probably that data that formed the meat of this study in fact. I was speaking more about rate quotes when shopping; if you are online no one knows who you are. As a woman that is a concern to me; other studies have shown that we get charged more too.
This is a great post, did the study state anything specific regarding discrimination against women in particular?
That particular study didn’t address gender in mortgage lending but did mention that women pay more when shopping for cars (about 1/2% more in fact) in person but paid the same when shopping online. So either online shoppers are more assertive or there could be some discrimination. In any event, it can’t hurt to at least get a few quotes on the Web — regardless of your gender.