Latino and Hispanic families are driving America’s housing growth. Over the past decade, they’ve accounted for more than half of the net homeownership gains in the U.S., a sign of progress and promise. But despite these impressive strides, many Latinos still face challenges when it comes to securing a mortgage.
An Urban Institute study indicates that as the rate of Latino homeownership continues to rise, mortgage approval rates for them remain disproportionately low compared to other groups. What can Latino homebuyers do about it?
This guide walks Hispanic first-time homebuyers through what to know about the mortgage process, how to improve your chances of approval and how to get a loan that works for you.
Why Homeownership is Harder to Attain for Latinos
Latino homeownership is growing faster than any other demographic, but mortgage approval remains a major hurdle for many. Here’s why:
1. Credit score challenges
Many Arizona Latino families rely more on cash or avoid traditional debt, leading to limited credit histories. Unfortunately, traditional credit scoring models can penalize those without extensive credit use, even if they’re financially responsible.
2. Higher debt-to-income ratios
Supporting extended family or sending remittances abroad are common in Latino households. While honorable, these financial obligations can raise a borrower’s debt-to-income (DTI) ratio, which lenders often flag as a risk.
3. Lower access to intergenerational wealth
With fewer opportunities to inherit money or property, many Latino buyers must come up with a down payment and closing costs on their own. That can make qualifying for a loan more difficult.
4. Nontraditional income sources
Gig work, cash jobs and self-employment are more common among Latinos in Arizona. But unless properly documented, these income sources can be overlooked or undervalued by traditional lenders.
While these challenges are real, they’re not impossible to overcome. Understanding the process and taking proactive steps can help you secure the financing you need.
Step 1: Understand the Mortgage Application Process
The mortgage process can be complex, especially for first-time buyers, but breaking it into clear steps makes it more manageable.
Check your credit report and score
Start by reviewing your credit reports at AnnualCreditReport.com. Look for errors and take steps to raise your score. A credit score of 620+ is usually needed for a conventional loan, but a higher score can get you a better interest rate.
To help your score, use secured credit cards, credit-builder loans, or rent-reporting tools to help establish or improve your credit history.
Get pre-approved
Pre-approval shows sellers you’re a serious buyer and gives you a price range to shop within. You’ll need:
- Pay stubs
- Tax returns
- Bank statements
- ID and employment verification
Know your loan options
Different mortgage types serve different financial situations:
- Conventional loans: For buyers with strong credit and 3%–5% down
- FHA loans: Low down payment, credit scores as low as 580
- VA and USDA loans: For veterans or buyers in rural areas, often with no down payment
Choose the right lender
Not all lenders evaluate applications the same. Find one who:
- Offers bilingual services
- Understands nontraditional credit
- Works with first-time or low-income buyers
You can also consult with a HUD-approved housing counselor for free support.
Arizona Central Credit Union can meet your needs if you’re looking for a home loan. We serve the Arizona community with loans that can put you in your own house.
Submit your full application
Once ready, submit your mortgage application. The lender will review your finances, and if approved, you’ll receive a Loan Estimate showing your interest rate, monthly payment and closing costs.
Step 2: Improve Your Chances of Approval
Even if you don’t fit into a traditional lending mold, you can take action to improve your chances.
Build your credit
Raise your credit score by paying bills on time, lowering credit card balances and avoiding new debt. Tools like Experian Boost or rent-reporting services can help add payment histories to your credit file.
Lower your debt-to-income ratio
Pay down credit card balances or loans and avoid large new debts (like a car loan) before applying. If possible, boost your income and keep a clear record of earnings.
Save more for your down payment
The more you put down, the better your chances of approval. Saving also helps reduce your monthly payment and may eliminate the need for mortgage insurance.
Here’s ways to get more for a down payment:
- Use automatic transfers to save consistently
- Look for down payment assistance programs in your area
- Accept documented gift money from family, if available
Document all sources of income
If you’re self-employed or working in the gig economy, keep detailed records. Lenders typically want to see:
- Two years of tax returns
- Bank statements
- 1099s or profit and loss statements
Depositing cash income into a bank account creates a verifiable paper trail.
Take a homebuyer education course
These courses explain the homebuying process and can qualify you for special mortgage programs. Many are offered through nonprofit organizations or housing counselors.
How Culturally Inclusive Lending is Helping
The traditional mortgage system doesn’t always reflect the realities of Arizona Hispanic families, but that’s starting to change.
Encouraging progress includes:
- Flexible income documentation: Programs are evolving to accommodate gig and non-W2 income.
- Bilingual support: More lenders and housing agencies are offering resources in Spanish.
- First-generation buyer programs: Some initiatives specifically support buyers who are the first in their families to purchase a home.
These changes are long overdue, and they’re gaining traction. As the Latino community continues to grow in size and buying power, more lending institutions are stepping up to serve them with fairness and understanding.
Homeownership is Within Reach at AZCCU
Yes, there are barriers. But those barriers can be overcome with the right knowledge, preparation and support. If you’re an Arizona Latino dreaming of homeownership, know that the system is starting to adapt, and your dream is valid, possible and worth pursuing.
At Arizona Central Credit Union, we have home mortgage options to help you get your own home to build equity, stability and a legacy for generations to come. If you have any questions, contact us online or call (866) 264-6421.
