This is the first part in NCRC’s 2026 Mortgage Market Series. Subsequent articles will examine lending by race and ethnicity, by neighborhood, across cities, in Native American and Hawaiian communities, in the down payment assistance market and among the largest lenders.
Buying a home is still the main way most American families build wealth. It is also one of the largest financial decisions a household will make, ultimately shaping where people live, where their kids go to school and what their finances look like for decades to come.
For three years in a row, the number of families buying homes has remained the same at about 2.9 million. This is a warning sign. Homeownership is fundamental to how Americans build wealth, and it has always been plagued by unequal access. For decades, housing policy has sought to expand homeownership to all Americans on an equal basis.
If we want to see homeownership continue to grow among people traditionally excluded from this path to building wealth, we need to see growth in the number of home purchases. Instead, the number of purchase loans remains frozen in place, with the people who can still afford to buy being increasingly limited to people that already have substantial wealth.
The market is not just stuck, but is changing in ways that further limit the ability of families to transition from renting to ownership. The mix of lenders inside are also changing in ways that will have consequences for those families and neighborhoods most likely to be left out. In 2025, banks made less than a third of the home purchase loans in America. Mortgage companies, which do not take deposits and have no physical branch locations, made almost two-thirds.
The Community Reinvestment Act that was passed in 1977 to push banks to lend in the lower-income and historically excluded neighborhoods where they take deposits applies only to banks. The lenders making most of the home purchase loans in 2025 have no such obligation.
Jason Richardson, Senior Director of Research
Resources
For the complete series, including videos, interactive visualizations and localized market analysis, visit our 2026 Mortgage Market series homepage.
NCRC uses AI tools to assist with data processing, query development and report drafting. NCRC maintains full responsibility for the accuracy of all published analyses.
For customized community data requests or inquiries about membership benefits contact Ralph Cyrus (Membership Engagement Specialist) at rcyrus@ncrc.org.
Key Takeaways
1
Home purchase originations held flat for a third straight year at about 2.87 million in 2025, 35% below the 2021 peak of 4.42 million, with none of the rebound that a normal market produces after a downturn.
2
Banks originated 30.1% of home purchase loans in 2025, down from 42.5% in 2018. Mortgage companies originated 64.2%, up from 44.6% over the same period.
3
The home purchase denial rate held steady at about 7%. But, the denial reasons have shifted away from credit score and other reasons and directly toward reasons that are related to affordability. Debt-to-income was cited in 42% of denials in 2025 – up from 35% in 2021 – as higher rates and prices pushed the same borrowers into higher debt-to-income bands.
4
Banks’ lending to nondepository financial institutions, the channel that funds nonbank mortgage companies, increased. Since 2018 this lending has tripled from $417 billion to $1.4 trillion, concentrated among the largest banks.
Applications and Originations
Lenders received 13.5 million applications in 2025. That is up modestly from the 2023 low but is still a 48% drop from the 26.2 million filed in 2021, when rates were at historic pandemic lows.
The chart below shows the total number of mortgage applications for the 2021 through 2025 period broken into three outcomes: originated, denied and fallout. The fallout category combines the number of applications the borrower withdrew, applications that were closed because the paperwork was never completed and applications that were approved but were not accepted by the borrower.
The collapse from 2021 to 2023 was driven mostly by refinancing. Mortgage rates roughly doubled over those two years, from around 3% to around 7%. Refinance applications fell by about two-thirds when rates rose because refinancing only saves money when the new rate is lower than the existing one, and most homeowners are now locked in well below current rates. Refinance volume is now recovering modestly as borrowers adjust. Home purchase applications fell less sharply, by about a third, but have not recovered at all.
Home purchase loans declined less than refinances but have remained flat since 2023. Originations haven’t changed much in number or when it comes to the overall share of applications, meaning that we aren’t seeing a tightening of credit. Instead, the number of people applying for loans is staying stagnant.
The chart below shows the number of home purchase applications reported by lenders for each year along with the outcome of the application (origination, denial or fallout), including reasons such as borrower withdrawing from the process, declining the lender’s offer or other reasons:
A normal housing market would produce a rebound two years after a decline. Traditionally, higher prices and rates drive buyers from the market. Then, prices adjust and buyers come back. Home purchase lending has not come back. The number of applications has held flat, with the mix of denials, originations and fallouts barely shifting across that time period. Each year, roughly the same share of loans is originated, denied, withdrawn or left incomplete.
The data we have describe only the people who reach the point of applying for a loan, and that pool is shrinking at the front end. Would-be buyers who can see they cannot afford today’s prices and rates increasingly do not apply at all, so the applicants who remain are tilted toward those who already have money. Incomes have risen, but home prices and interest rates rose faster, and the buyers who cannot cover the larger down payment and monthly cost are simply absent from the data.
That selection is the quieter force behind a flat market, and it matters more given who is doing the lending. Banks have pulled back from originating mortgages directly to buyers, and nonbank mortgage companies have taken their place, lenders that carry no obligation under the Community Reinvestment Act to serve lower-income borrowers. As the cost of buying climbs and the buyer pool narrows to those who can absorb it, the lenders gaining ground have the least reason to chase the lower-income families the law was built to reach.
The chart below shows the originations that were made during the 2021 through 2025 period broken into five categories: home purchase, refinance, cash-out refinance, home improvement and home equity:
Rates of refinance lending have rebounded modestly in 2025, although it remains much lower than the lending in 2020 and 2021. Home equity and home improvement lending have held steady. Home purchase lending has held at about 2.9 million originations per year for three years running, with no sign of recovering. Three years at this volume is where we can safely call it a trend. It is indicative of a market that has adjusted to higher rates and higher prices and shows no signs of changing its direction.
The Role of the Debt-to-Income Ratio
The applicants who do file are running into a different set of pressures than the ones who applied four years ago, and the same applicant now looks riskier to a lender than they would have then, largely because of the rate environment. The clearest single measure of that pressure is the debt-to-income ratio. Debt-to-income, or DTI, is the share of a borrower’s gross monthly income that goes to debt payments, including the proposed mortgage plus credit cards, car loans, student loans and other monthly obligations. Lenders treat it as a primary measure of whether a borrower can afford to take on a mortgage, and the lower the ratio, the more comfortable the lender is with the loan.
The chart below shows the rates of home purchase applicants distributed across four DTI bands in 2021 and 2025 separated by whether the loan was originated or denied:
The share of originated home purchase loans where the borrower’s DTI was in the safest band, under 36%, fell by 11 percentage points. The share of loans with a DTI above 50% – the territory where most lenders will not write a conventional loan without compensating factors – grew. This same pattern appears more sharply on the denied loan applications side. Among denied applications, the share above 50% DTI rose to nearly half.
A buyer in 2025 borrowing $400,000 at a 7% rate faces a monthly principal and interest payment of about $2,660. The same loan in 2021 at 3% would have carried a payment of about $1,690. That is nearly $1,000 more per month for the same loan amount, on top of higher home prices over the same period. The same income now stretches less against the cost of buying a home today.
This does not mean lenders relaxed their standards. It means rising rates and rising home prices pushed the same kind of borrower into a higher DTI band than they would have been in when rates were lower. A buyer who would have qualified comfortably four years ago is now struggling to get a loan with the same income.
The Reasons Borrowers are Getting Denied has Changed
When a lender denies a home purchase application, they record up to four reasons. The home purchase denial rate has held steady at about 7% across the period. What has changed is the mix of reasons lenders are citing.
In 2021, DTI was listed as a reason in 35% of denied home purchase applications. By 2025, that share had climbed to 42%. This is the same trend visible in the DTI distribution chart above. Applicants across the board have higher DTI ratios. When more applicants are pushing into the high-DTI territory of the application pool, more denials cite DTI as the reason. A recent Federal Reserve Bank of St. Louis study of more than 30 million home purchase applications found that when interest rates spiked in 2022 and 2023, more people were denied because the higher monthly payments pushed their debt too high relative to their income.
The other denial reasons in the chart fit the same pattern. Insufficient cash for the down payment and closing costs grew from 8% of denied applications in 2021 to 12% in 2025. Borrowers can have the income to support a mortgage and still fail to assemble the cash needed to close on a home at today’s prices. The other denial reasons showed little change over the time period. Lenders are not denying borrowers for creditworthiness as much as they used to. They are citing affordability as the biggest barrier that today’s homebuyers face.
Banks are Leaving Home Purchase Lending and the CRA is Leaving with Them
The most consequential shift in the 2025 home purchase market is not how many loans are getting made. It is who is making them. Banks originated about 30% of home purchase loans in 2025, down from more than 40% in 2018. Mortgage companies, which do not take deposits and have no physical branches, now originate almost two-thirds of the market.
The chart below shows that shift across the full period:
Lender type matters because the federal framework that governs mortgage lending was built around banks. The Community Reinvestment Act (CRA) is the government’s primary tool for ensuring mortgage credit reaches communities that have been historically underserved. The CRA only applies to banks, not mortgage companies or credit unions. In return for deposit insurance and federal support, a bank accepts an obligation to serve its whole community, while a non-bank mortgage company takes on no such duty. As banks make up a smaller share of the home purchase market, the share of lending subject to any community service obligation shrinks along with it.
The way that banks participate in the mortgage market has changed. Report data show that as banks have made fewer home loans, their lending to nondepository financial institutions, the channel that funds the nonbank mortgage companies, has grown. This kind of lending by banks has more than tripled between 2018 and 2025, from about $417 billion to $1.4 trillion. The shift is concentrated among the largest banks. Even as banks step back from mortgage lending, they remain deeply tied to the mortgage market and increasingly finance lenders that carry no such obligation.
The federal response to this gap has been stymied for years, with the financial sector resisting any requirements that mandate them to consider the credit needs of the community. In October 2023, federal regulators finalized a long-overdue update to the CRA rules that would have, among other things, evaluated large banks on their lending performance outside of their branch networks, which is where a growing share of bank lending actually happens. Unfortunately, the 2023 rule never took effect.
Methodology
This analysis uses data from the Home Mortgage Disclosure Act (HMDA) modified Loan Application Register (LAR) for the 2018 through 2025 period, which was released by the Consumer Financial Protection Bureau (CFPB) on March 31, 2026 as the Modified LAR. Since this analysis began the CFPB has released the final snapshot file. NCRC has determined that the differences between the modified LAR and the snapshot are minor and no relevant to this analysis.
Resources
For the complete series, including videos, interactive visualizations and localized market analysis, visit our 2026 Mortgage Market series homepage. NCRC members can request customized community data requests as well. Those interested in membership benefits should contact Ralph Cyrus (Membership Engagement Specialist) at rcyrus@ncrc.org.
