Digital mortgages are making it easier for single women to buy homes.
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Studies show that digital, algorithm-based mortgage solutions discriminate less than more traditional lending models (about 40% less, in fact)—ultimately enabling more approvals of minorities, as well as lower loan costs for those borrowers as well. New data released this morning supports these findings even further.
According to a report released by digital mortgage lender Better.com, the company has seen a massive uptick in single female homebuyers using its algorithm-based lending platform. Over the last year, the number of single, minority female borrowers has increased 500%, while the number of single women borrowers in the 30-to-40 age range jumped 450%.
Over the same time period, nearly a full quarter of the lender’s borrowers were single females. That’s more than the industry average of 17%, according to the National Association of Realtors. (Only 9% of home sales last year came from single males).
Married women are still one of the lender’s biggest borrower groups, but according to the data, an increasing number (one out of three) aren’t putting their spouses on their loan applications. And when they do? They’re usually out-earning them.
In fact, Better.com reports that its average female co-borrower earns a monthly salary of $5,666. Their spouses earn just over $3,000.
A survey of agents at Compass, a tech-enabled real estate brokerage operating across the U.S., shows agents are seeing the increase of single women buyers (and high-earning ones at that) on the ground, too. According to the findings, 58% of agents said the majority of their buyers are female, and 80% said they’ve seen a rise in women as the primary source of income on homebuying applications.
“I have definitely noticed an increase in single female buyers,” says Becki Danchik, a broker with Warburg Realty in New York City. “The majority of my clientele over the past couple of years has been single female buyers. These women are successful, they have high-earning jobs, and they have been saving their money for years.”
Still, it’s not just women who are seeing benefit from the uptick in digital mortgage solutions. According to the NBER study, algorithm-based mortgage lenders result in better approval rates for black and Latinx buyers, too.
Better.com’s numbers support these findings as well. The company saw a 532% increase in Hispanic borrowers in the 30-to-40 age range last year and a 411% increase in black borrowers.
As Sarah Pierce, Better.com’s head of sales, explains: “The rise of digital in real estate has empowered individuals—regardless of gender, marital status or race—to apply for a loan from the convenience of their mobile device.”
Minority Homebuyer Tips for Success
Keep your offer simple.
“Don’t ask for everything under the sun. Make it easy for the seller and the seller’s agent to select your offer. Don’t haggle over a few thousand dollars … $3,000 on a 30-year mortgage is not a lot. Don’t get caught up in winning the negotiation.”
– John Finley, Sotheby’s – Encinitas
Be thorough when determining who you’ll work with.
“Surround yourself with the best team—agent, attorney, lender, etc. When searching for an agent, ask to talk to past clients, and most importantly, ask if the agent has recently closed on properties similar to what you’re looking for in terms of both price range and location. You’ll also want to check for a personality fit. Do you want someone who is patient and will guide you through the process? Or do you want someone who works fast and is straight to the point? Go with an agent that will suit your shopping style.”
— Maria Belen Avellaneda, Compass
Have a good handle on your budget—and what you want from your home.
“Know what you can afford. Being realistic with your budget and keeping monthly payments in mind will help you stay focused on homes in your price range. Everyone has a unique situation and knowing your own comfort zone is crucial. Keep an open mind in regards to owning a traditional single-family home, a condominium or a townhouse. They each have their own qualities and staying aligned with your goals for the future and growing into your space is key.”
— Debbie Bennett, Angel Oak Home Loans
Separate the emotion.
“To the extent possible, try to separate emotion and logic. People talk about buying a home, but ‘home’ is an emotional concept. You are buying a house, a physical object with features and shortcomings, and need to evaluate it carefully and relative to your capabilities. You need to consider the time and cost commitment needed for maintenance—let alone improvement—and consider things like the cost and time component of a changing commute, for example. Getting in over one’s head isn’t likely to happen from the mortgage side, but it can get overwhelming from the management/maintenance/change-of-lifestyle side.”
— Keith Gumbinger, HSH.com
Educate yourself.
“First and foremost, knowledge is power for first-time homebuyers, so take advantage of every possible resource in the market. Go to homebuyer seminars, track your credit profile, and set your budget before you jump into the process. These steps will position you for success in a sellers’ market and help you stand out among other buyers.”
— Bob Driscoll, Rockland Trust
Use your agent to their fullest.
“A buyer’s agent is paid by the seller the majority of the time, so I always think it’s a good idea to have a seasoned agent as an advocate and advisor. An agent can help assess your finances in relation to the investment, help prepare documentation so that they are prepared to make an offer and can refer attorneys, lenders, contractors, etc.”
— George Case, Warburg Realty
Know your market and be ready to compete.
“If you’re in a low inventory market with high competition, you need to start early. The day you find your dream home and know you’ll be competing isn’t the first day to start talking about strategy. I recommend buyers start very early in the mortgage process. Too many buyers let their dream home start the process instead of proactively setting themselves up to find their dream home. Talk with a lender months before you’re ready, so you can find out if you need to consolidate debts or increase your down payment. Often minor changes to your credit can have a big impact.”
— Matt Van Winkle, RE/MAX Northwest Realtors
Shop around—even if you have a lender in mind.
“Shopping around is one of the most effective ways for consumers to get the best mortgage. Even if you have a preferred lender in mind, go to two or three lenders—or even more—to make sure you are fully evaluating your options. A tenth of a percent on interest rates may not seem like much, but it can translate to thousands of dollars over the span of the loan. Once you find the lender that best fits your needs, ask about a pre-approval, which can be helpful when it comes to shopping for a home in a competitive housing market.”
— John Pataky, TIAA Bank
Pull at their heartstrings.
“All buyers should include a personalized letter with every offer to make themselves standout. While this may add another responsibility for the buyer, it is the perfect way to create an emotional connection with the seller. Sharing a little information about yourself, why you love the home or neighborhood, or your attachment to the community humanizes you as a buyer and can help win over a seller who may be attached to their home.”
— Rich Gibbons, Prevu
Get a handle on your credit.
“Get to grips with your credit score. It’s free, and won’t impact your creditworthiness. There are various steps you may be able to take to either improve or preserve your credit score:
- Start by reading up on the factors that determine your score and which are weighted more heavily than others. For example, payment history and credit usage are the top two most influential factors in determining your score. It’s important to understand the nuances of how your score works before you can start to improve it.
- Not sure where to begin paying off your debts? Consider the snowball method, a strategy that helps you to build momentum by paying off entire debts incrementally. Start small, pay it off, then tackle the next debt.
- See something on your credit report that doesn’t quite look right? You can dispute any errors that may be dragging your credit score down. This can be done by filing a dispute with the major credit scoring agencies, or by reaching out to the lender in question.
- It can be tempting to embark on a home furnishings shopping spree, but to keep your score from taking a nosedive after you apply for a mortgage, avoid opening any new credit accounts—whether it’s a credit card or auto loan—until your home loan closes.”
— Chris de la Motte, Simplist
Go beyond the pre-approval.
“Having a pre-approval in hand in a good first step. Additionally, and if possible, have a soft underwrite from the get-go. Put a good amount of money down for deposit, and limit the amount of contingencies if you can. These things will show the seller that you are serious and strong and will position you to get the home you want. Also have the lender call the listing agent at the time of the offer to speak to the strength of the buyer. This is a technique top agents use to differentiate their clients.”
— Christopher Arienti, RE/MAX Executive Realty
Remember that cash is king.
“Save early and save often if you haven’t already. Cash is king, even when you are qualifying for a loan. Having a larger earnest money down payment and putting more money down at closing create advantages. If you are one of the few who can pay all cash for a home, you will be able tighten all the deadlines until close and have a significant advantage over other buyers. Most of us can’t bring a full cash offer when buying a home.”
— Jen Horner, RE/MAX Masters
Have the right attitude.
“Be confident but not ostentatious; be complimentary but not to the point of cotton candy; and be willing to negotiate but do not purposely lowball an offer. Asking the right questions, for example: Why is the seller leaving? How old is the roof? Learning the home history can help you determine your offer or if you want to walk away from a property.”
— Rich Schulhoff, CEO of Brooklyn MLS
Have a good picture of your financial station.
“Know yourself and how a lender will see you. In addition to getting your credit and paperwork in order, decide beforehand how to best distribute your assets among downpayment, points, closing costs and reserves. Know what kind of mortgage you want and what term you want. There’s a big difference between saying to a lender ‘I need a mortgage’ and ‘I need a 30-year fixed-rate mortgage, don’t want to pay any points, and not more than $5,000 in closing costs. What do you have to offer?’ The more precise you can be, the easier your mortgage shopping and comparison experience will be.”
— Gumbinger, HSH.com
Know your DTI.
“Look closely at your debt-to-income ratio. Your DTI ratio is the relationship between your monthly payments versus your gross monthly income. There are two types of DTI ratios: The first is front-end debt to income ratio, which is the percentage of your monthly income that is used to pay for your house’s expenses—mortgage payment, property taxes and insurance. The second one is back-end debt-to-income ratio, which is more important to mortgage lenders. This includes all your debt, which will include mortgage payment, property taxes, insurance and any other financial expenses including autos, credit cards, student loans and any other loans you may be paying. So it is important to work to reduce your debt and/or increasing your income.”
— Joseph Zoppi, Templar Real Estate Enterprises
Know who you’re buying from.
“Understanding the motivation of the seller is key to helping you stand out from other buyers. Your agent should be building a rapport with the listing agent to learn more about what are the key things motivating the homeowner to sell. Then to help you stand out from other buyers, you craft your offer to address those key things to fit what the seller is looking to achieve. Many times, the offers that are accepted are not those with the highest price.”
— Kristina Morales, Berkshire Hathaway Home Services
Consider a bigger down payment
“Save up for a down payment. You’ll need at least 3.5% of the price of the loan in cash, although lenders love to see down payments of up to 20%. The larger the down payment you put forth, the better the odds of lowering your interest rate and monthly payment. If you’re not quite at your target number yet, there are plenty of ways to trim additional expenses—and they can really add up. Whether it’s pausing the gym membership to run outside and participate in free local classes, or forgoing the daily office cafeteria run in favor of a little meal-prep action, little things can make a big difference. You’ll be there in no time.”
— de la Motte