File this under more bad news in 2019: a new study from Iowa State University shows that same-sex borrowers are being discriminated against in terms of mortgages. When it comes to home buying, most people make a downpayment and take out a mortgage loan to cover the rest of the cost, before paying off the mortgage over time. The new study, however, shows that same-sex couples applying for mortgage loans face lower approval rates and higher financing fees, meaning that queer people are having trouble getting approved for mortgages even if they are qualified. This leads to paying more for mortgages than a straight couple would.
The study found that gay borrowers are actually “less risky” than straight borrowers, but are a whopping 73% more likely to be denied when applying for a loan. The study also showed that if a same-sex couple is approved for a loan, their interest rates could be .02% to .2% higher than straight borrowers. While this sounds like a small percentage, paying even a slightly higher interest rate could add thousands of dollars onto the cost of repaying the loan over time.
The combinations of higher denial rates and higher interest charges could indicate that there is a systemic bias against same-sex couples in mortgage lending. The study explains, “Our investigation on mortgage performance reveals that same-sex applicants are less likely to prepay mortgages and are no more likely to default than their peers, indicating that they are less risky to lenders. Given the absence of evidence that suggests that same-sex status is a reliable signal for loan underperformance, potential disparate lending practices against sexual orientation might exist in the mortgage market.”