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Believe It: Mortgage Discrimination is a Real Thing

Disappointed man showing paper with denied mortgage applicationMortgage discrimination is illegal. This is crucial information that you should know if you’re planning on applying for a home loan to purchase, refinance, or renovate a house. Fortunately, two federal statutes — the Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA) — offer ample protections against mortgage discrimination. Discrimination takes on many forms, but generally involves policies or practices that enable borrowers to be penalized or denied outright for a mortgage due to race, sex, religion, or ethnicity among others.

How Borrowers are Protected Against Mortgage Discrimination

The Fair Housing Act (FHA) prohibits discrimination in transactions related to real estate, such as taking out a loan for purchasing, building, improving, or renovating a home. The act also protects against discrimination when appraising, brokering, or selling residential real estate, as well as renting or selling a home. Additionally, the FHA bans discrimination due to race, national origin, sex, religion, familial status, or disabilities. The act also covers individuals below 18 years old who live with a parent or guardian, those trying to gain custody of kids below 18 years old, and pregnant women. The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination of color, race, sex, religion, national origin, age, marital status, or whether an individual receives income coming from public assistance programs. Although creditors are free to inquire about this information, they are legally forbidden from using it to set credit terms or deny you credit. Anyone participating in decision-making when granting credit or setting credit terms, which includes property brokers, should comply with the act at all times.

Main Takeaways

Mortgage discrimination could impact anyone. If you are looking to apply for a home loan, whether it’s a fixed rate mortgage, FHA loan, or adjustable rate mortgage, remember the laws that could protect you against potential discrimination and research prospective lenders well. Do take note that not all people who apply for a home loan will get approval and this isn’t mortgage discrimination. Lenders have all the legal right to use standard factors including your credit history, income, debts, and income when determining your mortgage application. To that end, you have to ensure that you have a solid application and meet standard requirements in order to increase your chances being approved for a home loan.
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