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Young Mortgage Loan Borrowers Called to Buy Homes

young couple together on the couch holding hands
In an economy overrun with record youth unemployed and underemployment, mortgage loan lenders are scrambling to find young adults to borrow mortgage loans.

Without young adults moving into homes, the economy could face a bumpy road ahead.

One of the biggest roadblocks to young adults jumping into the home market and becoming homeowners is student loans.

Loans.org spoke with several lending experts to learn just how bad the homeownership situation is for young adults and to see just how much the mortgage loan industry needs them.

Gloria Shulman, CEO of Centek Capital Group, told loans.org that student loans have reached a crisis level as she has even witnessed surgeons, a group of professionals who make an average of $260,000 a year, being denied home loans due to their college debt.

“President Obama needs to use his bully pulpit and get banks to be less oppressive with their lending requirements,” she said. “It is safe to say that a surgeon will be a responsible borrower and it's common sense to bring them into the market as home buyers.”

Shulman also noted that young adults, already carrying light wallets thanks to a tough job market, now have to compete with cash buyers and investors. She also said that the lengthy appraisal process eats up too much time thanks to excessive regulations.

“Appraisals need to be easier, quicker, more reliable, less dependent on short sales as comparables,” she said.

Despite feeling overwhelmed by the process, Shulman recommends that if young adults currently have a job that yields high enough income, then they should act now to take advantage of historically low interest rates and get a starter home that will prove to be a great investment come time to sell or upgrade.

Jordan Roth, Senior Branch Manager at GFI Mortgage Bankers, told loans.org that the mortgage loan industry desperately needs Generation Y to begin purchasing homes. He said that while home purchases have increased since the beginning of this year, they are still below the highs of 2008. He noted that growth in the mortgage loan industry would lead to additional employment as a bonus.

Roth concurred with Shulman that purchasing a starter home is a wise financial decision. Roth noted that young adults typically experience increases in incomes as they grow older and that they will be able to look back on making a down payment as a negligible cost.

He also advises young adults to consider real estate investment.

“If one chooses, a young adult can purchase a home and live in it for a few years, and instead of selling decide to keep it as an investment property and rent it out,” he said. “This allows for additional income (assuming the rental covers all home expenses) as well as the ability to begin to obtain other properties.”

According to Roth, there aren’t many obstacles that prevent young adults from purchasing homes. However, he did note that property prices in certain areas of the country are substantial — even for smaller homes. Worse still, he pointed out that Fannie Mae and Freddie Mac do not permit non-occupant co-borrowers, thus severely limiting entry-level young adults from purchasing a home if they have a co-borrower (such as parents) who does not intend to live in the property.

Doug Leever, Mortgage Sales Manager for Tropical Financial Credit Union, told loans.org that eager Generation Y homebuyers really just need to find the right home loan lender who can take care of their needs and work with them to achieve the American Dream. He recommends young adults to seek out lenders who have first-time home buyer programs.

Leever recognized the threat that the $1 trillion dollar Student Debt Crisis poses for young adults. He pointed out that first-time home buyer programs can address many of the problems that indebted young adults have, such as having enough funds for a down payment. While virtually all young adults will be making down payments, they need not be massive thanks to certain first-time home buyer programs.

“This allows them to not drain their savings for a down payment, especially with the student loans that they might have, but still allows them to purchase their first home right out of school,” said Leever.

He also noted that the high unemployment and underemployment amongst young adults has had a sizable impact on the housing industry. However, unemployment is steadily decreasing while property values are only increasing — signaling a rebounding economy.  

He said that reaching out to young adults was the impetus for Tropical Financial Credit Union creating the Young and Free program, which helps young adults understand the benefits of buying versus renting a home and how to get on the path to homeownership.

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