50 Years Ago, Women Couldn't Buy Homes. Here's The Legislation That Changed That
Women's History Month is a great time to celebrate ECOA.
- The Equal Credit Opportunity Act passed in 1974, and it prevents lenders from discriminating against borrowers for reasons unrelated to creditworthiness.
- Building credit is part of developing a solid financial footing.
- If you want to buy a home, you can't be discriminated against for your sex, but you still need to get your credit in shape, save a down payment, and reckon with the costs of homeownership.
A lot of people have big financial goals, and I'm no exception. I'm currently focused on saving money to buy a home, and I'll be making that purchase on my own, without anyone else's financial assistance. But 50 years ago, I might not have been able to get a mortgage loan in my own name, thanks to being a woman. The Equal Credit Opportunity Act (ECOA) changed that, though. Let's discuss the legislation and how it impacts the lives of ordinary Americans.
The Equal Credit Opportunity Act
The ECOA was passed by Congress in 1974, and it was landmark legislation for civil rights. Prior to its passage, lenders could and did discriminate against potential borrowers for reasons beyond their creditworthiness, such as their sex, marital status, race, and religion. This meant it would have been a lot more difficult, and perhaps impossible, for certain Americans to qualify for a mortgage loan, credit card, auto loan, or any other opportunity to borrow money.
Since you build credit by borrowing money and showing lenders your ability to pay it back on time and in full, this left a lot of Americans without the ability to build a solid financial footing. Bear in mind, lenders are still allowed to deny you credit, but it must be for a reason such as having a low credit score or not enough income to pay back a loan. And thanks to the Fair Credit Reporting Act of 1970, they must notify you in writing and provide information about why your application for credit was denied.
If you're anyone other than a white man, you can thank ECOA for the credit cards in your wallet, the bank accounts in your name, and the mortgage loan you make payments on every month. And since March is Women's History Month, now is the perfect time to celebrate this legislation.
Steps women should take to buy a home
While women can't legally be discriminated against in our quest to buy homes, there's still a lot that goes into a home purchase. If you're like me and dreaming about future homeownership, have a look at this to-do list to be sure you're in the best position to buy.
- Truly understand the costs: Buying and owning a home isn't cheap. Before you make the leap, crunch the numbers and dig into your budget to be sure you can afford not just a mortgage payment, but also taxes, homeowners insurance, and maintenance costs.
- Get your credit in good shape: Your mortgage application can't be denied because you're a woman, but it can be if your credit isn't sufficient to qualify. Get a copy of your credit report and see if you find errors that can be removed. Focus on paying down debt and making on-time payments and watch your credit score rise.
- Save a down payment: If you can make a 20% down payment on a conventional loan, you won't have to pay for mortgage insurance. Plus, if you make a low down payment, you'll risk ending up underwater on your home loan.
- Shop around and get pre-approved: Different mortgage lenders offer different rates and different types of mortgages. It's in your best interest to speak to a few lenders and see what they can offer you. And getting pre-approved can give you the edge over other buyers, as a home seller will be able to see that you've got the financial footing to back up your offer.
This Women's History Month, take a little time to appreciate how far we've come, and gear up for how far we've still got to go (such as remedying that gender pay gap, for example). And if you're hoping to buy a home on your own, like I am, thank ECOA for giving you the opportunity.
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