Research reveals that while women are statistically better than men at keeping up with their mortgage payments, they’re also more likely to pay more for a loan. According to the Urban Institute, while women borrow less money from lenders than men, 4.9% of female homebuyers end up with a higher-priced mortgage loan compared to 4.6% of male homebuyers.
Check out our mortgage calculator.
What’s Behind the Gender Gap in Mortgage Lending?
It’s hard to say why women seem to be at a disadvantage when it comes to home buying. You might assume that it’s because women tend to have lower credit scores than men (resulting in higher mortgage rates). But some studies tell a different story. For example, a recent Experian study shows that women have average credit scores of 675, versus 670 for men.
You could also conclude that women just aren’t as good at managing their finances and perhaps have more debt than men. But research also contradicts that argument. Experian found that on average, women have 3.7% less debt.
One thing that we know for sure is that there’s a gender pay gap. That’s one factor that could possibly explain why more women end up paying more for mortgages. After all, having a smaller income might mean that you have less money to put toward a down payment and other housing costs. Having less disposable income could cause a lender to raise your mortgage rate.
Some research suggests that female homeowners are worse off than their male counterparts, particularly when it comes to home appreciation. An analysis from RealtyTrac found that among single male homeowners, home values were 10% higher, on average, than those among single female homeowners. Home appreciation for single male homeowners was more than $10,000 higher.
Find out now: How much house can I afford?
What Can Women Do to Get the Best Deal on a Mortgage?
If you’re a woman who’s planning to apply for a mortgage, it’s important to understand that getting a low mortgage rate might be difficult. If you don’t want to pay more for a loan than you need to, here are some steps you might want to take.
- Reduce your debt-to-income ratio. Even though the data suggests that women may have less debt than men, they’re also bringing home smaller paychecks. Paying down as much of your debt as possible can lower your debt-to-income ratio and potentially strengthen your position as a borrower.
- Lower your credit utilization ratio. This is how much credit you’ve used relative to your credit limit. By paying off credit card debt and using your credit card less often, you might be able to reduce your credit utilization ratio (also known as your debt-to-credit ratio). Lowering your debt-to-credit ratio can raise your credit score.
- Save up for a larger down payment. Putting down 20% or more on a home can work in your favor in two ways. First, it allows you to avoid paying private mortgage insurance (PMI), which can add to the cost of buying a home. Second, it means you’re financing a smaller amount, which may lower your mortgage rate. You can increase your chances of ending up with a cheaper home loan by paying more cash up front.
Get your free credit score now.
Perhaps the most important thing women can do to secure the best deal on a mortgage is to take time to shop around. Comparing loan offers from multiple lenders can help you avoid loans that are more expensive.
Photo credit: ©iStock.com/AndreyPopov, ©iStock.com/skynesher, ©iStock.com/VladimirFLoyd