More than a third of the Latino households surveyed by the Pew Research Center said they’d used something other than a traditional mortgage. Alternative financing can come with high costs and risks.
A MARTINEZ, HOST:
Last year, about half of Latino households in the U.S. were homeowners. And according to the Urban Institute, this group could make up 70% of new homeowners over the next two decades. But new findings suggest Latinos are more likely than any other ethnic group to use risky home financing. More than a third of those households surveyed by the Pew Research Center said they tapped something other than a traditional mortgage to purchase a house. And that alternative financing can come with steep costs and also high risks. Joining us to discuss what this could mean for U.S. homeownership long term is Lot Diaz. He’s vice president of Housing and Financial Empowerment with the Latino advocacy group UnidosUS. Lot, welcome to the show.
LOT DIAZ: Thank you.
MARTINEZ: All right. Now, when most Americans buy a house, they take out a traditional 30-year mortgage. But there’s a whole world of alternative financial products out there. Some have some pretty significant risks. Lot, tell us about how these products work and what they are.
DIAZ: People get into these products for two reasons. One, they’re not aware there’s other options. A typical family gets an FHA or conventional mortgage that is priced at appropriate levels. Families need to know how to apply for those, get into those. Many times, they’re sold for products that are not these types. They’re higher cost. So that’s the – one reason. And the second reason – they have not protected their credit. And so when they start to apply for a conventional or FHA loan, they can’t beat the filters, and they get denied. They seek other avenues. And there’s plenty of marketing for these alternative products that are more costly and can present a risk over time to a family to maintain their home.
MARTINEZ: When it comes to just simply qualifying for a loan to purchase a home, when it comes to that, are Latinos maybe behind the eight ball a bit? Are they not getting approved as much?
DIAZ: The data seems to indicate that’s the case. What we’ve seen within our partners in the market is that they tend to get declined (ph) at a greater rate. And many times, it’s really because they don’t fully understand or respond to the lender in a way that the lender’s expecting, or they’re asking for documentation and other items that are required that is difficult for them to get because their income is not maybe …….