By Geoff Williams Published on November 18, 2014 to USNews.com
Your neighborhood is probably missing something.
You may feel it lacks sidewalks or stop signs, but what it probably doesn’t have many of are millennials, a generation that generally includes those born between 1981 and 1996, according to the Pew Research Center.
At least, the statistics tell us there aren’t as many young homeowners as there used to be. Thirty-six percent of American homeowners are 35 and younger, the lowest on record since 1982, when the census’s Housing Vacancy Survey began tracking homeownership by age. Those age 65 and older have a much higher rate of homeownership – 80 percent – but that’s expected. The longer you live, the more time you’ve had to save and buy a house.
If you’re in your 20s or early 30s and aren’t a homeowner but wish you were, you may wonder what happened. Have you been doing something wrong? Are you stuck in your apartment or your parents’ basement forever?
No – and probably not. Here are just some of the reasons you’re probably not having much luck getting a mortgage.
You have a lot of student loans. There are numerous factors pushing against millennials’ plans for homeownership, including the economic hangover from the recession, but student loans are a major obstacle. Even if a lender doesn’t see your massive student loan debt as something that could prevent you from making a mortgage payment, plenty of potential homeowners do.
“Most of us can’t [buy a house] because of student loans and stagnant wages. If you’re having to pay $400 a month to Sallie Mae, how are you supposed to save for a home?” asks Rachael Nichol, a 26-year-old social media manager in Atlanta who did buy a house last August.
Student loans have so far kept Michael McGinn from buying a home. “I’m 28 and haven’t purchased a house yet because my fiancee has over $100,000 in student loan debt from nursing school,” says McGinn, who works in public relations in New York City. “We will keep renting an apartment for at least the next five years until she pays it off. We figure we’ll be able to secure a lower interest rate once that debt is off the books, and the extra time will allow us to increase our savings for a down payment.”
You lack a credit history. Lenders may see you as a risk if you have no credit history, says Alex Vercheski, a real estate agent with Keller Williams Realty of Greensboro, in North Carolina.
“The best way to help yourself early on to be able to buy a home is to establish credit, as this is one of the biggest factors a mortgage company looks at,” Vercheski says. “Get a credit card as soon as you turn 18 and start establishing credit.”
Keep in mind that the Credit CARD Act of 2009 made it difficult for anyone under 21 to get a credit card. It’s not impossible, but you’d need to show proof of sufficient income to cover the credit obligations or get a parent or guardian to cosign your account.
And, of course, you need to be careful when using a credit card to establish credit. Too much credit card debt can make mortgage lenders wary. Millennials, on average, have less credit card debt than older generations, according to Experian’s 2013 State of Credit Report. Millennials hold an average of $2,682 in credit card debt, compared with the average Generation X and baby boomer credit card debt of more than $5,000. But the average millennial is two to four times more likely to make a late payment than the older generations.
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