We know that the path to building wealth often starts with a home. We are the future of homeownership in America: Latino households are projected to drive 70 percent of net homeownership gains through 2040 (Urban Institute). That incredible growth is nuestro poder (our power).
But let’s be honest: securing a mortgage has always been an uphill climb. For decades, the process has favored borrowers with a long history of traditional credit, leaving many in our community, especially first-generation professionals, on the outside looking in. This is why a major change in the U.S. mortgage world is a huge win for us.
The Big Shift in U.S. Mortgage Credit
A massive development is changing how lenders decide who qualifies for a government-backed mortgage (loans funded by Fannie Mae and Freddie Mac). The Federal Housing Finance Agency (FHFA) has approved a second major credit scoring system, VantageScore 4.0, for use in the mortgage market.
Until recently, lenders were mostly limited to using one traditional scoring model. Now, they can choose between the classic system and VantageScore 4.0. This choice is about more than just competition; it’s about financial inclusion and recognizing your real-life responsibility.
Why VantageScore 4.0 is a Game Changer for Our Community
Traditional credit scores often fall short when evaluating people who are credit-invisible or credit-thin, meaning they don’t have enough loans or credit card history to generate a score. This disproportionately affects younger borrowers and communities of color, including Latinos.
In fact, the median credit score for Hispanic home loan borrowers in a recent report was 716, compared to 750 for non-Hispanic whites, often due to a lack of access to traditional credit building opportunities (Consumer Financial Protection Bureau data cited in Foothold Technology).
VantageScore 4.0 directly addresses this gap by including data that reflects responsible behavior we already demonstrate every month:
- Your Rent Payments: Timely payments to a landlord can now contribute to a stronger score.
- Utility Bills: On-time payments for essentials like electricity, water, and gas.
- Cell Phone Payments: Consistent payment of your phone bill is recognized as a mark of reliability.
This non-traditional data allows VantageScore 4.0 to score 33 million more U.S. adults who were previously unscorable by older models (Equifax data cited in PR Newswire). For many of us who may not have had a credit card until later in life but have been reliably paying rent since college, this is a monumental step forward.
What This Means for You on the Path to Homeownership
If you are a young Latino professional working toward buying your first home, this shift is critical. It means that the financial habits you have been keeping (paying your rent and bills on time) may finally translate directly into a stronger mortgage application.
The goal here is simple: to make the credit evaluation process fairer and more equitable. Your everyday financial discipline is now gaining the recognition it deserves, which can lead to:
- Qualification: Being able to qualify for a government-backed mortgage when you might not have before.
- Better Rates: A higher credit score, thanks to your responsible payment history, often qualifies you for a lower interest rate, saving you thousands of dollars over the life of the loan.
- A Clearer Path: The change acknowledges that nuestra financial stability isn’t just about debt; it’s about reliable, consistent payment behavior.
This is a move toward a more inclusive financial system in the U.S., one that better supports the Latino homeownership growth that is powering the economy. Our hard work and commitment to our future are now being recognized in a real, tangible way that opens doors: the doors to our first home.
👉 Ask Gabi, the “judgment free zone” for all of your financial questions!
Stay tuned! We got you!
GabrielTeam
