4 Challenges Women Face in Homebuying

This month at the TFG, we are focusing on homeownership. In honor of International Women’s Day, we want to highlight the strides women have made in homeownership and the challenges they still face.

Over the past 30 years, women have made substantial gains in homeownership:

But challenges for women in homeownership remain — particularly for single women, single mothers, and BIPOC women.

More Expensive Mortgages

In almost every state, women pay more than men for their mortgages (Alaska is the only exception). The difference was highest in Mississippi where women had an average interest rate of 3.47% compared to 3.37% for men. This translates to thousands of dollars more women pay in interest over the life of their mortgage.

This may be due to single women’s weaker credit scores overall, which causes them to be over-represented in the subprime (i.e. high-interest) mortgage market. However, the Urban Institute found that even though women have weaker credit profiles, they are less likely than men to default on their mortgages.

This means that the criteria lenders use to assess single women borrowers’ risk may lead to more denials of women for mortgages despite a greater likelihood that they would keep up with their payments.

Higher Prices, Lower Returns

Single women pay more for their homes and sell them for less than their single male counterparts. A Yale study found that single women actually pay about 2% more when buying a home, and then sell their homes for 2% less than single men. On average, women lose out on $1,600 per year in returns on the sale of their homes compared to men.

The study also found that single men typically timed the housing market better than single women. It suggested that single women with children might not have as much flexibility to try to time the market, leading them to sell at less opportune times.

Interestingly, this gender gap in housing returns basically disappears during tight housing markets like the one we’re in now. 

Debt-to-Income Disparities

It’s no secret that housing prices have been rising rapidly over the past few years. These higher prices combined with women’s lower salaries on average compared to men are making it more difficult for them to qualify for the types of homes they would like to buy. 

Income is a key factor in getting approved for a mortgage. Lenders consider how much of a borrower’s monthly income would go towards their mortgage payment and they typically won’t approve levels above 43%. Other debt payments factor into this calculation as well. This can be especially limiting for Black women who carry a disproportionate amount of student loan debt, for example.

Financial Pressures of Single Motherhood

Especially during the pandemic, women have taken on even more childcare responsibilities and that has sometimes affected their ability to make an income. This has been especially tricky for single mothers who don’t have anyone to share the childcare load with. 

Caring for dependents on one income can also stretch a budget and make it difficult to save up for a down payment. According to a study from Freddie Mac, 82% of single women-headed households say that they wouldn’t be able to pay for a down payment or closing costs to buy a home. Even worse, 60% believe that they may never be able to afford a home.

Homeownership is a major goal for a lot of our clients. While we work with them on this goal one-on-one, the challenges they face extend beyond the individual to issues such as equal pay, student loans, education, and affordable childcare. More work is still needed on a macro level on these issues to ease women’s path to homeownership.

Kylie Lipinski, A Certified Financial Trainer