Deborah Kearns

NerdWallet

They’re graduating from college, starting new jobs, getting married and having kids. But one life goal that’s eluding a lot of Millennials is homeownership, according to a new NerdWallet analysis.



It’s not that young people don’t want to own homes. In fact, most Millennials would like to buy a home but haven’t yet done so because they think they can’t afford it, the analysis found. In other words, Millennials want the stability and freedom that homeownership affords, but they worry they won’t qualify for an affordable loan.

In its analysis, personal finance website NerdWallet looked at a number of surveys and data from government agencies and Fannie Mae to examine commonly held beliefs about the decline in homeownership among younger first-time buyers.

Millennials — those born from 1981 to 1997 — are expected to form some 20 million households by 2025.

Affordability, costs are perceived barriers

A 2014 Fannie Mae survey found that 57% of young renters cited financial reasons for not buying a home. Those reasons included poor credit, high down payment costs, a low monthly income and too much existing debt as the main obstacles. But even facing these perceived roadblocks, young renters in that same survey said they were considering buying homes, and 49% said their next move would likely be into a home they own.

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“Contrary to popular belief, Millennials still view homeownership as a desirable goal, just like previous generations, but a lot of them simply don’t know they have options to get their foot in the door,” says Chris Ling, mortgage manager at NerdWallet.

Home affordability could also be a roadblock to Millennials as interest rates climb and the median price of existing homes keeps rising. In February, that price rose 4.4% to $210,800 year over year, according to the National Association of Realtors.

NerdWallet’s analysis found that Millennials aren’t facing insurmountable debt and that debt-to-income ratios for this group, as a whole, are at healthy levels. For instance, 53% of young renters had debts of less than $10,000, and just 10% had debts over $50,000.

Don't try to buy a better credit score to buy a home

While it’s no secret that student loan debt has soared in the past decade, to an average of nearly $29,000 per borrower, this isn’t holding Millennials back from buying a home. In reality, NerdWallet’s research discovered that the more education a consumer has, the more likely he or she is to own a home.

Homebuying help

Finding the right type of mortgage can be an overwhelming process, and Millennials may not be aware of the types of assistance available for making a down payment or qualifying for a competitive loan rate. That’s where doing some online research can help, Ling says.



"The Internet is an extraordinary resource,” he says. “It’s transforming homebuying with a wide array of tools that can help younger buyers make the leap to homeownership.”

If you're a first-time homebuyer, the Consumer Financial Protection Bureau has a helpful resource page to guide you through the ins and outs of the process, and you can get a step-by-step overview of homebuying from the U.S. Department of Housing and Urban Development.

Additionally, you can research what your monthly payments would be with online mortgage calculators such as the one on NerdWallet. Real-life affordability tools can help you determine how much house you can afford. And those struggling with student loan debt may qualify for income-based repayment options.

MORE: Compare mortgage rates

MORE: NerdWallet’s home affordability tool

MORE: How income-based student loan repayment works

Deborah Kearns is a staff writer at NerdWallet, a personal finance website. Email: dkearns@nerdwallet.com. Twitter: @debbie_kearns

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