Millennials in the Housing Market: Navigating Debt and Driving Tech

Millennials are trading leases for mortgages, and according to a report published by the National Association of REALTORS (NAR), they account for the fastest-growing segment of homebuyers today. They’re making this jump during a particularly complex moment in history, contending first with initial pandemic lockdowns and then with inventory shortages. Importantly, they are doing so while juggling student loan debt, with the average Millennial borrower owing $38,877. It’s no secret that Millennials face higher costs of living, significant increases in college tuition, and lower wages than their parents. In fact, one Business Insider article explains that the net worth of Americans aged 18-25 has decreased by 34% since 1996, meaning that the average net worth of Millennials in the U.S. is less than $8,000. Understandably, taking on the responsibility of a mortgage while trying to pay off student debt can be challenging.

NAR’s most recent study on student loan debt notes that half of non-homeowners cite student loan debt as the reason they are delaying buying a house. In the study, 60% of non-homeowning Millennials say student loan debt is forcing them to press pause on home purchases, compared to 53% of non-homeowning Gen Xers and 37% of non-homeowning Baby Boomers. More specifically, nearly half of student loan debt holders explain that they can’t save for a down payment or that their debt-to-income ratio will prevent them from qualifying for a mortgage.

However, Millennials can take steps to improve the strength of their applications. Borrowers can ask family members to co-sign on loans to improve their credit scores. Student loan payment history is also very important. Defaulting on student loans will impact a borrower’s credit score and may make it harder to get approved for a mortgage because lenders may be wary of the borrower’s ability to repay debt.

Interestingly, 38% of student loan debt holders reported that the pandemic actually helped them get closer to paying off debt, likely because of the U.S. Department of Education’s decision to suspend loan payments without accruing interest. Other factors, such as spending less on dining and entertainment due to lockdown restrictions, have also played a part in helping Millennials catch up on payments.

Beyond improving their credit score, Millennial homebuyers have additional tools to help them make homeownership a reality. Mortgages backed by the Federal Housing Authority (FHA) offer lower interest rates, leniency with credit scores, and lower down payments. This type of mortgage may appeal to Millennials who have been unable to save due to high student loan debt, or whose credit score has been impacted by falling behind on loan payments.

Millennials can – and definitely are – purchasing homes. This generation’s financial strains may certainly affect how and when they buy, but Millennial homebuyers are generally tech-savvy and are pushing all aspects of the housing industry to keep pace with their digital competencies. Millennials expect quick, seamless communication and the ability to research many options at once.

Millennial consumers are navigating important decisions around homebuying and personal finances with the help of mobile apps and improved technology. In fact, Millennials expect nearly instant access to market information, with 99% using the internet to research real estate and mortgages. Homebuyers can shop for homes, request mortgage quotes, research surrounding neighborhoods and school districts, and set up meetings with their real estate agents and lenders within minutes or seconds, all from their mobile devices. This level of accessibility is especially important to Millennials, who grew up learning how to harness the power of smartphones and the internet.

NAR notes that for Millennials, understanding necessary paperwork and processes is more difficult than for any other generation. But streamlined mortgage and homebuying technology can make these processes more transparent and less daunting. When Millennials are ready to buy, nearly-instant access to digital mortgage solutions, real estate listings, and banking information means that they can do so confidently.

About SimpleNexus
Founded in 2011, SimpleNexus is an award-winning developer of mobile-first technology for the modern mortgage lender. Lenders depend on our namesake homeownership platform to unite the people, systems, and stages of the mortgage process into a seamless, end-to-end solution that spans engagement, origination, closing, and business intelligence. By helping lenders manage their teams and stay connected with borrowers and real estate partners, we deliver a measurable return on investment in the form of reduced turn times, increased loan application submissions, and more referral business. A four-time Inc. 5000 company, SimpleNexus has been recognized as one of the world’s Best Workplaces for Innovators.

About the Author

Lauren Jones

Lauren Jones has years of experience writing and editing content in both professional and academic environments. As a Marketing Communications Specialist at SimpleNexus, she works to create and edit blog posts, social media, and internal and external communications for sales and marketing divisions. She is responsible for researching and writing about trends, innovations, and news at the intersection of finance and mortgage technology.

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