Military Service Helps Close the Hispanic and Latino Homeownership Gap

Hispanic Veterans are poised to experience significant growth in homeownership rates over the next two decades.

An Urban Institute study from earlier this year projects that 70% of new homeowners between 2020 and 2040 will be Hispanic.

Census data shows that military service plays an outsized role in helping to close the homeownership gap for Hispanic and Latino consumers.

That nearly 20 percentage point disparity between military and civilian Hispanic buyers exists back to at least 2015, according to recent Census breakdowns.

The military will only continue to become more diverse, and Hispanic and Latino Veterans are likely to become major drivers of growth for the VA loan program. This hard-earned benefit will also continue to shrink the homeownership and wealth gap for future generations of Hispanic and Latino Veterans and their families.

‘Stronger roots’

Hispanics and Latinos accounted for 35.9% of household growth between 2010 and 2020, according to Census data. The overall Hispanic homeownership rate increased every year from 2015 to 2020.

Disparities in homeownership rates have been prevalent for years, especially among minority homebuyers. The narrower gap for Hispanic and Latino Veterans speaks directly to the power of the VA home loan benefit.

This program was created to expand access to homeownership for Veterans and service members. VA loans allow qualified buyers to purchase with no down payment, no mortgage insurance, access to the industry’s lowest average rates and more flexible credit guidelines.

Hispanic and Latino borrowers can face unique challenges when it comes to credit access and building the kind of assets needed for conventional financing. The VA loan benefit all but eliminates those hurdles for those who serve.

Shrinking the gap

To be sure, Hispanic homebuyers can face a host of structural barriers and financial challenges. They typically have less income and assets and lower credit scores than white buyers, according to the Urban Institute.

Military service often provides additional advantages beyond the VA loan benefit. Active duty service members have stable, reliable income that’s easy for mortgage lenders to document and count on. Many Hispanic and Latino Veterans are able to turn their military skills and training into solid civilian jobs once they transition from service.

The Department of Veterans Affairs estimates that the population of Hispanic and Latino Veterans will increase from 8-12% from 2019 to 2045.

In turn, that growth will likely shrink the Hispanic and Latino homeownership gap even further, with younger Veterans in particular leading the way.

Through the first three quarters of Fiscal Year 2021, Millennial and Generation Z Veterans accounted for 52% of all VA purchase loans, according to national VA lending data.

“Given the obstacles that many Hispanic buyers face, this unique loan program offers some powerful lessons for how we might look to close the homeownership gap for all buyers,” Birk said.