Many would-be homebuyers are being deterred from the housing market because of the burden of student loan repayments, a new survey finds. But could it be all in their heads?
The National Association of Realtors and the not-for-profit group American Student Assistance teamed together to conduct research into student debt and its effects on home-buying decisions. An overwhelming 71% of respondents said that repayments on student loans were preventing them from buying a house; half of them expected to be saddled with those loans for at least another five years.
“Homeownership rate is at a 50-year low,” Lawrence Yun, chief economist for the NAR, told the Washington Post. “For most middle-class families, they have always perceived housing equity as their main source of wealth building. But fewer people are participating in home ownership, particularly among the younger generation, and that is tied to student debt, at least according to our survey.”
And it’s not just first-time homebuyers who are being affected. Current home owners said they felt financially prohibited from selling their current home to upgrade to a new one.
Some, however, believe that the results may be more psychological than fiscal — that even people who are currently repaying their eductational loans could find suitable mortgages rates or low interest home loans if they tried. After all, the long-term rates for home mortgages fell to 3.31% by the end of 2012.
“It’s certainly possible,” Yun said. “But one looks at also the hard data, and the hard data is showing home ownership is low. The people that are qualifying for mortgages, their credit scores are way, way up there. People that are younger, they have yet to develop their credit.”
In most cases, local mortgage lenders require a minimum credit score of 680, or, in the case of FHA rates for home mortgages, 620.
The Washington Post is quick to point out that, despite the debt, a college education increases one’s chances of securing stable financial employment, which is another factor that home mortgage lenders often take into account. Additionally, sudden changes to income or employment status can greatly affect the mortgage process.
No matter the size of student debt, there are rates for home mortgages for every situation, including zero down home loans. An education shouldn’t interfere with home ownership. Where there’s a will, there’s a way.