Real Estate News

Miami has most mortgage denials than any other city in the U.S., study says. Here’s why

“For sale” signs dot a Miami-Dade County neighborhood on Thursday, July 5, 2018.
“For sale” signs dot a Miami-Dade County neighborhood on Thursday, July 5, 2018.

For several years now, Miami has been ranked as one of the worst cities in the U.S. in terms of cost-burdened renters, or households spending more than 30 percent of their income on rent.

Now a new study by LendingTree, an online loan marketplace, ranks Miami at the top spot of another bad list: Cities with the highest rates of mortgage declines.

The study, which analyzed more than 10 million mortgage application records using 2018 data from the federal Home Mortgage Disclosure Act, concludes that 11.6 percent of all mortgage applications filed in Miami are declined — the highest rate of denials of any city in the U.S.

A high debt-to-income ratio was the cause for 32.4 percent of the denied applications. Lack of collateral (meaning the lender’s appraisal of the property is lower than the asking price) accounted for nearly 23 percent of declines.

The problem isn’t limited to Miami, either. Florida cities took the top four slots in the list of top 50 metros for mortgage declines: Orlando (11 percent decline rate), Tampa (9.5 percent) and Jacksonville (9.5 percent).

Applicants in those cities, too, were penalized for their debt-to-income ratio, one indication that South Florida’s stagnant wage growth could be a statewide problem.

According to the study, the national rate for mortgage declines was 9.8 percent. Debt-to-income was the most prevalent reason for denials (33 percent). A bad credit history was the second most impactful factor on a national scale, claiming 23 percent of denials.

The study also broke out discrepancies in denials by race and ethnicity: African-American borrowers had the highest rate of denials (17.4 percent) while non-Hispanic whites had the lowest rate (7.9 percent). Hispanics clocked in somewhere in the middle, with a denial rate of 13 percent.

Despite the bad news for Florida, the study concludes that the percentage of 2018 mortgage denials across the U.S. were at their lowest rate since 2004.

“The low denial rate is encouraging, though some of this is because the financial profile of mortgage applicants has improved,” wrote LendingTree chief mortgage economist Tendayi Kapfidze, who conducted the study. “The key for homebuyers is to be well-educated on the homebuying and mortgage process.”

The three cities with the lowest rate of mortgage declines were Minneapolis (4.6 percent), Salt Lake City (4.9 percent) and Kansas City (4.9 percent).

You can read the full study here.