They may be smart and well educated, but many young Americans are struggling to buy a home, and this is something that could put a damper on the housing market for many years to come. It’s all too easy to miss a payment on a student loan, but doing so can lead to less than perfect credit scores, making it far more expensive to get a mortgage.
In addition any debt that young Americans have, such as student loans, is taken into account when calculating how bigger mortgage they can take out. Not surprisingly more young graduates are choosing to move home to live with their parents, and the article in CNN.com quotes the recent Pew survey that found some 36% of young adults were choosing to do so. This is definitely something that will save money on living expenses, but unfortunately it doesn’t give them a chance to build up any sort of credit history of their own, and that’s essential to get a mortgage.
When all these factors are combined the result is fewer 18 to 32-year-olds are forming households. The Pew survey found just 34.3% of this age group was able to form households in March 2013 compared to 36.1% in 2007. Some students are leaving college literally hundreds of thousands of dollars in debt, and while they may have landed good jobs they are finding that mortgage lenders don’t even want to process their loan applications. These graduates are looking towards buying a home in their mid-30s at the earliest.
Other applicants looking to purchase a home are facing difficulties of a different nature, especially if they’re in the habit of making cash deposits to their checking account as opposed to receiving regular checks from their employer. This is something that may affect those who receive cash tips as part of their job. The article in AOL.com explains that lenders are required to only regard money from reliable sources as being proof of income, and which can therefore be used for the mortgage transaction. This means potential borrowers could be asked to explain any deposits that haven’t been documented, and having to do so can slow down the purchase process.
Experts are recommending that borrowers avoid making deposits that need any explanation for a minimum of two months before the planned closing date, as after this time has elapsed the money won’t be questioned as is regarded as being “seasoned.” It’s perfectly okay for someone who is self-employed and who receives cash as part of his employment to include these deposits as part of their income, provided they can show the money has been properly documented on their tax return.