Low Credit Scores Holding Many Would-Be American Homebuyers Back

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Is there anything more American than buying a little piece of land, building a house, and putting up a white picket fence in the front yard and a flag on the porch? Home ownership is something that Americans take pride in and use to gauge financial success and prosperity. But the fact remains that home ownership rates across the country are at record lows – could low credit scores be one of the primary culprits?

Credit Scores

Homeownership Hits 50-Year Record Low

Rosen Consulting Group has performed vast amounts of research on the topic of home ownership in the U.S. and the numbers they’ve uncovered are bleak and puzzling. Over the last 10 years, home ownership rates have taken a major plunge. Nationally, the homeownership rate has dropped from a peak of 69 percent in 2004 to an average of just 63.4 percent towards the end of 2016. That’s the lowest rate in more than half a century.

When you study which people groups have been affected the most, it becomes clear that young adults (those 25-34), African Americans, and single-parent families have seen the steepest decline. But they aren’t the only ones. More than 9.4 million homes were lost in foreclosure during the recession and many of these individuals – who were once wealthy and stable – have been unable to recover in a manner that allows them to secure home loans.

The Role of Low Credit Scores

There’s a lot that goes into the loan approval process for buying a home, but one of the key factors lenders look at is credit. If an applicant’s credit history and score don’t fall into certain ranges, they’ll never make it past the first stages of screening.

According to a recent Credit Sesame survey, low credit scores are putting home ownership firmly out of reach for one out of every five consumers. Most troubling is the fact that low credit scores are proving to be a major hindrance to one out of every four homebuyers aged 35 to 44 – an age where consumers are supposed to be gaining more solid financial footing.

The Credit Sesame survey shows that lack of cash for a down payment (41 percent) and high housing prices (31 percent) are to blame for low home ownership rates.

Homebuyers Must be Proactive

“Bolstering homeownership in a safe and sound way is not just about helping households secure financial stability, but may be the single most important factor in returning the United States to a path of robust economic growth,” says Ken Rosen, Chairman of Rosen Consulting Group and one of the leaders behind the company’s recent research into home ownership rates. “This report highlights the current state of homeownership, and the many factors that contributed to the plunge in homeownership rates during the past decade.”

The question millions of Americans are left asking is, “How do I become a homeowner when there are so many debilitating factors working against me?” For starters, financial responsibility is key. Americans need to spend less than they make, pay down debt, stash away money in liquid savings accounts, and work on repairing low credit scores.

For the vast majority of Americans, it will only take a few months to see some progress. A few months of being smart with money and proactively attacking debt, low credit scores, and income problems will make the prospect of buying a home much more realistic.

The mentality of sitting back and waiting for something to happen won’t work. Interest rates are on the rise and those on the outside looking in can save thousands of dollars by cleaning up their act now, rather than later. There’s hope for Americans to recover from this 50-year record low of home ownership, but it’s going to take some action.

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