On Thursday, May 7, Zillow will visit Detroit as part of its Housing Roadmap to 2016 series of events and roundtables.

The housing issues Detroit faces are both familiar to dozens of struggling cities nationwide, and utterly unique to the Motor City. Leading up to our May 7 visit, we will be posting a series of research pieces diving in to these complex issues. We hope to shed light on the challenges, but also to illuminate what makes the city so unique and glean potential lessons from which other struggling cities may be able to learn.

Below is the fourth in this series. Our prior Detroit-specific research can be found here.

Mortgage originations remained extremely low in Detroit through the end of 2013, and it is not yet clear how mortgage activity has changed since then because the best federal data from the Home Mortgage Disclosure Act (HMDA) is published with a substantial lag. But early signals from Zillow Mortgages data suggest that consumer interest in mortgages accelerated in Detroit toward the end of 2014 and into the first quarter of 2015.[1]

Zillow Mortgages traffic among borrowers seeking purchase loans in Detroit grew three times faster than nationwide traffic during the second half of 2014 and the first quarter of 2015. Growth was particularly strong outside Detroit’s downtown core, suggesting growing interest in mortgage borrowing by a broader base of Detroit consumers.

But while the number of potential Detroit home buyers seeking loans on Zillow Mortgages has been growing rapidly in outlying parts of the city, there remain stark differences between both the incomes and loan amounts sought by downtown borrowers and borrowers elsewhere in the city (figure 1).

This could be troublesome for borrowers seeking to buy lower-priced homes outside downtown, for a few reasons. First, lenders are sometimes reluctant to write loans for low amounts, as they may be less profitable and more risky. Additionally, borrowers seeking smaller loans tend to pay higher fees per dollar-borrowed than similar borrowers seeking larger loans, since many of the costs associated with applying for and closing a loan are fixed costs, and so represent a larger share of the final amount of a smaller loan. For example, if loan costs are fixed at $5,000, for a loan of $25,000, those costs represent 20 percent of the final loan amount. But those same fixed costs on a $100,000 loan would represent only 5 percent of the final loan amount.

In addition to concerns about the value of a home that underlies a given loan, mortgage lenders frequently cite poor credit scores as one of the primary reasons why loans in Detroit are denied, particularly for black applicants. Mortgage credit remains extremely tight by historical standards (though it has eased substantially since the end of the recession).

Beyond the downtown core, particularly along the northern edge of the city bordering Oakland County, larger shares of borrowers on Zillow Mortgages report credit scores below 640 – a threshold below which it is extremely difficult to borrow. However, among viable borrowers – those with a credit score of 640 or higher – the trendier Downtown and Midtown neighborhoods have relatively high shares of borrowers with credit scores between 640 and 719 (figure 2) – the middle tier of credit scores, in which it can sometimes be more difficult or costly to obtain a loan.

These middle-tier credit scores may also reflect the relative youth of many of the mortgage shoppers in these emerging neighborhoods. Younger borrowers – even those with a good repayment and credit history – may have lower credit scores if their credit histories are shorter or if they carry student debt.

[1] Zillow Mortgages traffic data are a decent leading indicator of mortgage applications, and purchase prices submitted by consumers nationwide seeking mortgages on Zillow are broadly representative of national purchase prices.