Millennial Mess: Why Millennials Don’t Always Qualify for Mortgage

a house

Buying and owning a house is part of the American Dream. According to a mortgage company in Salt Lake City, it’s one of the most significant factors that contribute to wealth accumulation. Owning a house often means a person is secure enough in his/her finances that they can afford a property. But for millennials, this isn’t always true.

According to Experian, the world’s leading information services company, and the National Association of Realtors, only one in six millennials are homeowners. This is 8 percent lower than Gen X, and baby boomers were in the same age of 22 to 35. NAR cited two main reasons, namely:

1. Low Credit Scores

Millennials make up the largest credit population in the United States. But, according to NAR and Experian’s study, only 39 percent of millennials without a mortgage have prime credit scores. A prime level credit score is from 661 to 780. According to the study, people reach this level as they grow old.

The average credit score in the U.S. is 677, a level that most millennials don’t reach. Among millennials aged 22 to 28, the average credit score is 652, while older millennials aged 29 to 35 have an average prime score of 665.

2. High Delinquency Rates

Delinquency in financial terms means a borrower is overdue on a payment. Today, millennials account for 21 percent of all new personal loans. According to Experian, younger millennials have an average loan balance of $7,300 while older millennials have a loan balance of $11,700, on average.

When it comes to overdue payments, the national delinquency rate is 1.32 percent. Still, millennials’ delinquency rates are higher than the national average during the last quarter of 2017. For younger millennials, 2.08 percent are delinquent with their loans. The older millennials aren’t much better with a 1.51 percent delinquency rate.

Despite this, Rod Griffin, Experian director of consumer education and awareness, still thinks millennials can learn a lot about credit. “Often, young people start their credit journey with a couple of mistakes first, but in the end, these mistakes create opportunities to learn how to use and build credit responsibly,” he said.