The Asian American population in the US has increased significantly, from 3.6 million in 1980 to 18.8 million in 2019, and it is projected to account for 9.1 percent of the population (or 36.8 million people) by 2060. But this rapidly growing population has substantially lower homeownership rates than white Americans: 57 percent of Asian households owned homes in 2018, compared with 72 percent of non-Hispanic white households.

One contributing factor is that Asian applicants have higher mortgage denial rates than white mortgage applicants, despite having higher credit scores.  Using 2019 Home Mortgage Disclosure Act (HMDA) data, we found that the denial rate for Asian mortgage applicants is 8.7 percent, compared with 6.7 percent for white mortgage applicants.

In expensive areas, such as San Francisco and New York City, the denial gap is around 3 percentage points, more than the national average 2 percentage-point denial gap. But we find the largest gap in areas with middle- or low-price housing markets. In San Antonio and Indianapolis, for example, the denial gap was more than 5 percentage points in 2019. This finding suggests that Asian applicants are consistently denied more frequently than white applicants, regardless of home price.

This analysis highlights an important yet often overlooked barrier Asian applicants face in the housing market. Failing to address this denial gap would keep more potential Asian homebuyers out of homeownership and widen the homeownership gap between Asian and white households.

Read the full article about mortgage denial rates by Linna Zhu, Jun Zhu, and Laurie Goodman at Urban Institute.