According to research by Pew Charitable Trusts, 34% of Hispanic homeowners used non-mortgage financing to purchase their home. That includes land contract loans, lease-to-own contracts, seller-financed mortgages, and personal property loans, which are more common for homes that are manufactured.
For comparison , approximately 23% of African-American borrowers used alternative financing for their home purchase, while 10% of white homebuyers did the same as Hispanics.
The financial system encourages lenders to make larger mortgages, so small balance loans they are proportionally more expensive to start, which means they are less profitable and therefore less attractive to most banks and other institutions.
That is why many Hispanics who do not have much income cannot access these loans.
However , the Pew report suggests that alternative financing is used more for loans of less than $150,10 dollars, so Hispanics tend to turn to them.
The problem is that while non-mortgage loans can be a way for some to own a home, they are often riskier than traditional mortgages and generally come with fewer protections for the borrower.
“One of the most important elements is when and how legal ownership of the home is transferred,” said Tara Roche, author of the research. And it is that some alternative financial arrangements, for example, prevent the buyer from legally becoming the owner of the property until the payment is fully paid.
“Because Latinos have a desire so strong of owning a home, sometimes they are willing to take on riskier financing to achieve it,” said Gary Acosta, co-founder and executive director of the National Association of Hispanic Real Estate Professionals, according to Baankrate.
“What matters most is that each borrower, whether Latino or not, should always receive the most competitive financing available to them.” added Acosta.
It should be noted that forecasts that Hispanic buyers will represent 70% of all new homeowners by 2040.
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