Homeownership is a typical way to build wealth in the U.S., yet student loan debt may be standing in the way for many hopeful buyers. Over 80 percent of individuals with student debt who have not yet bought a home cite these loans as a major obstacle.
Debt-to-income ratio, credit score, and coming up with the necessary down payment can all become barriers for potential homebuyers with student loan debt. Nearly one-fifth of mortgage applicants with student loan debt are denied due to their debt-to-income ratio, CNBC reports. "The bank looks at it as 'unsecured debt'," says certified financial planner Doug Amis. "With a mortgage, you have the asset of the house. If you stopped paying, you could foreclose on the house. But you can't go and foreclose on an education."
Some 45 million people in the United States carry student debt. The average borrower owes more than $30,000, according to Student Loan Hero, a website for managing education debt. Almost a fifth owe more than $100,000, according to the National Association of Realtors. For every 10 percent in student loan debt a person holds, their chance of home ownership drops between 1 and 2 percentage points during their first five years after school, according to the Federal Reserve.