Equal Credit Opportunity Act (ECOA)

When potential homeowners apply for a mortgage (or any other loan), the most important factor in getting approved and setting interest rates is their credit rating. The Equal Credit Opportunity Act (ECOA) forbids lenders from discriminating based on certain factors. Specifically, ECOA (enforced by the Federal Trade Commission) prevents creditors from discriminating based on:

• Race/color
• National origin
• Religion
• Marital status
• Age (except in some situations)
• Marital status
• Sex
• Whether a person receives public assistance

Often, credit applications will ask for at least some of this information. However, it is completely voluntary to provide such information, and it is used to ensure creditors and lenders are following the ECOA. Lenders may not reject your application, or even discourage you from applying, based on these criteria, though.

The exception to these discriminatory laws is age. Creditors may reject your application outright if you are under 18 or otherwise too young to sign a contract. In addition, if you are near retirement age, your income will likely drop soon, which will impact your income. However, there are some instances in which creditors favor applicants over 62 years old, as they will have a longer employment history. Favorability based on age in this situation is perfectly legal.

Though discrimination based on sex is illegal, women are often at a disadvantage, especially if they have been married. A record of payments on credit cards and loans may only exist in the husband’s name. It may be necessary for a separated or widowed woman to contact their credit reporting companies and ensure payments are recorded under their own name.
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Mortgage applications can be confusing, but an experienced real estate agent can provide advice to ensure you are getting the best loan for your situation.