Purchasing a home is the largest and most important financial decision in a person’s lifetime—so what happens when someone’s English language skills harm their ability to buy a home?

While buying a home is often a complex process regardless of the individual’s language skills, these complexities are only exacerbated for those who are not proficient in English. From a lack of translated document availability to complicated terminology, studies find that households with limited English proficiency (LEP) have a lower chance of becoming homeowners.

Understanding LEP Households 

Since the 1980s, the number of LEP households has grown significantly from two percent to nearly four percent today. The U.S. Census estimates that the country’s population is approaching 336 million people—and data released through the American Community Survey (ACS) in October 2023 found that more than 29 million identify as having limited English proficiency (LEP).

LEP people are defined as those who do not speak English as their primary language and have a limited ability to speak, read, write, or understand English. However, it is critical to understand that LEP speakers are by no means a monolithic group.

Research shows a variety of preferences for LEP homebuyers, many related to cultural norms and understanding. For example, a Spanish-speaking LEP borrower may have a strong preference for Spanish documents and were more likely to rely on family members to serve as a translator during the homebuying process. For Vietnamese- or Korean-speaking LEP borrowers, however, many preferred documents written in their native language but used English documents to compare them with the translations.

The Rate of Homeownership and LEP Households 

Language proficiency and usage play a role in an individual’s access to homeownership. LEP households in particular have a lower rate of homeownership (39.4 percent) compared to households who don’t speak English at home but are proficient (56.2 percent) and households who only speak English at home (67.2 percent).

Without language barriers, researchers find that the homeownership rate among LEP households has the potential to increase to 45.6 percent—or nearly 300,000 new homeowners.

However, many LEP individuals face a specific set of obstacles when purchasing a home compared to other homebuyers:

• Increased challenges throughout the mortgage process, including a lack of translated materials

• Lack of access to financial literacy and education, resulting in households and individuals feeling less empowered to take action and support their financial goals

• Problems during the mortgage application process, including having to resubmit or revise paperwork due to language barriers and misunderstandings

• Less familiarity with mortgage terms and contracts, likely due to the commonality and complexity of terms and inconsistencies with translated terms

• Higher cost of credit and interest rates despite having the same delinquency rate and performance as comparable EP borrowers

Expanding Homeownership for LEP Households 

Limited English proficiency is a significant barrier to homeownership—however, there are a number of steps that can be taken from a policy and advocacy lens to improve access to homeownership and wealth-building opportunities for LEP households.

• Long-term FHFA plans: In 2018, the Federal Housing Finance Agency (FHFA) published a multi-year plan with several milestones to support LEP borrowers in the mortgage process. During this time, a language access working group was formed to address the needs of homebuyers with limited English proficiency.

• Mortgage Translation Clearinghouse: In 2018, the FHFA and Fannie Mae, Freddie Mae, and the Federal Home Loan Banks (FHLBs) established the Mortgage Translation Clearinghouse. This initiative provides translations in Spanish, Chinese, Vietnamese, Korean, and Tagalog as well as glossaries in each of the translated languages with common mortgage and housing terminology.

• Financial changes: The Consumer Financial Protection Bureau (CFPB) has published reports on financial education programs that serve immigrant populations and LEP consumers. It provided recommendations on how financial institutions can best serve consumers’ language needs and provide an array of financial education materials in different languages.

While these changes have made positive steps forward, policy experts still recommend several changes to support homeownership rates for LEP households, including:

• Mortgage lenders with expanded language services: Because lenders have so many touchpoints with LEP consumers, expanded language services provide greater efficiency and support for potential borrowers. One study finds that among the 10 largest mortgage lenders, only five translate their entire websites into Spanish.

• Counseling specifically for document translation: Because some translated terms are inaccurate or complex, counseling can serve to help translate or explain different terms and concepts for consumers.

• Language diversity among professionals: LEP borrowers rely on professionals, such as real estate agents and loan officers, to navigate the homebuying process. By pairing professionals with language proficiency with LEP borrowers or homebuyers, greater confidence can be gained throughout the process.

At Smith NMTC Associates, we’ve pioneered a New Markets Tax Credits (NMTC) funding model to bring affordable, for-sale homeownership to many underserved communities in the U.S.

For nonprofit developers, investors, and lenders, we see a significant opportunity to leverage the NMTC program as a tool to drive more housing opportunities for underserved homeowners. To learn more about how the NMTC program can serve your community and your constituents, reach out to us.