On the road to homeownership, there are plenty of obstacles. Strict lending requirements, high upfront costs and an unstable market make it tough for just about anybody to buy a home. Add in a considerable student loan debt and the struggles come with being a first-time buyer and homeownership can seem like an unreachable destination.
According to a recent article in Bloomberg, many younger Americans simply aren’t entering the housing market – and it looks like student loan debt is the reason.
“As outstanding student debt approaches $1 trillion, it’s one more reason record-low interest rates aren’t doing more to boost housing,” wrote Bob Willis of Bloomberg. “The tighter lending standards that have emerged in the wake of the recession weigh particularly on younger, first-time home buyers, according to a Federal Reserve study sent to Congress on Jan. 4. These households tend to be younger, often have relatively new credit profiles, lower-than-average credit scores and fewer economic resources to make a large down payment, the report said.”
Student debt isn’t just affecting the students, either. According to the National Association of Home Builders, many parents are struggling to balance their children’s student debt with their mortgage responsibilities. The NAHB says that because so many parents have lost thousands of dollars in household wealth, they are no longer able to help finance their children’s education.
“As more and more parents face tighter budget restraints as a result of lower home values, this is forcing an increasing number of students to take out loans for tuition, essentially shifting some of the burden of paying for college from parents to students,” said Barry Rutenberg, chairman of the National Association of Home Builders.
Although recent grads may have a harder time finding affordable home financing, it’s not impossible. The good news is mortgage rates are remaining at historic lows while FHA loans, USDA loans, and VA mortgages continue to allow low down payment mortgage options and more lenient credit requirements. To learn more about opportunities for first-time buyers, contact a mortgage consultant in your area.
In other news, Freddie Mac’s most recent mortgage market survey (released earlier today) showed fixed mortgage rate averages dipping even lower. The 30 year home loan average slipped to 3.56% with .7 points and the 15 year home loan average also moved lower down to 2.86% with .7 points. At this same time last year, the 30 year average was 4.51% and the 15 year was 3.65%.