No savings, poor credit are adding up as problem for the generation.
A mortgage is the biggest debt most people ever have — and kind of an achievement. But most millennials may just stop at “student loans.”
Nearly 80 percent of millennials currently do not own a home, and 83 percent believe it is due to their loans, according to the National Association of Realtors. On average, many of them are in more debt ($41,200) than their total annual income ($38,800) and are nowhere close to being able to afford the average home price of $201,900.
“The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that’s influencing millennials’ housing choices and other major life decisions,” says NAR chief economist Lawrence Yun.
Millennials still want homes despite their debt, though, as 33 percent want to improve their credit to buy a house. But their other financial woes are piling on to the problems they face.
Currently, Americans are in $1.4 trillion worth of student debt. That monstrous milestone is making 90 percent of millennials consider making a five-year commitment to an employer, according to nonprofit The American Student Assistance.
But they have some demands for that commitment, including:
- 93 percent would take a sign on bonus to pay loans
- 92 percent want a repayment match on their loans, like a 401k match
- 89 want long-term financial planning
- 79 percent want free access to a debt counselor
On top of that, 40 percent of millennials say the debt is affecting their health. Forget about buying a home if you can’t stay healthy enough to save.
Can’t start to save
The loan problem is also making it harder for millennials to save.
Nearly 68 percent have less than $1,000 saved for a down payment on their home, according to Apartment List. Even worse, 44 percent of millennials have nothing saved at all.
That lack of savings is causing them to push when they expect to buy homes later than other generations. In 2014, 23 percent of millenials thought they needed five years to save for a home down payment, but now 36 percent feel they need that amount of time.
It’s not all bad for millennial savers though, as 36 percent save over a fifth of their paycheck, according to Merrill Edge. Better saving habits will help them pay back their loans faster and make a down payment more possible.
A possible solution?
One lending company is proposing a new way to make housing affordable despite the loans. Lennar says they will pay students up to $13,000, or 3 percent of the home’s price, towards their student loans if they take out a mortgage with their Eagle Home Mortgage company.
“Particularly with millennial buyers, people who want to buy a home of their own are not feeling as though they can move forward,” Eagle Mortgage president Jimmy Timmons says. “Our program is designed to relieve some of that burden and remove that barrier to owning a home.”
But there could be issues with the program despite the short-term relief. Persis Yu, a director at the National Consumer Law Center, says mortgage loans aren’t as flexible as student ones because they don’t include forgiveness, income-based repayment and deferment.
“I think people need to fully consider that, whatever choice they make,” she said.
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Article last modified on November 7, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Student Loans Are Stopping Millennials From Buying Homes - AMP.