Are millennial renters getting ready to make the leap into homeownership?
A recent study by TransUnion, a credit reporting bureau and data information company, found that 55 percent of people who applied for a mortgage and actively shopped for a home to buy during the first quarter of 2017 were non-homeowners, most of whom are renters.
The study reviewed generational differences in non-homeowners searching for a home loan and found that during the first quarter of this year, 29 percent of those shoppers were millennials, a slight increase over the same period in both 2015 and 2016. This increase in loan searches among millennials could indicate that this generation is about to enter the real estate market in greater numbers.
TransUnion also reviewed the VantageScores of renters and found that 34 million renters between ages 25 and 44 have a credit score of 580 or above, which means they may be eligible for a mortgage based on their credit score. Most lenders require a score of at least 580 for any mortgage loan approval; many require a higher score.
When reviewing the VantageScores by generation, 37 percent of those age 25 to 34 have a score under 580 and 42 percent of those age 35 to 44 have a score under 580.
One way these non-homeowners could potentially improve their credit scores is if their landlords report on-time rental payments to credit bureaus.
Of course, being creditworthy and shopping for a loan are steps toward homeownership, but this doesn’t mean that every renter looking to purchase will have the financial ability to buy a home or can find one they can afford.
Indications that millennials are increasing their shopping for loans and homes could lead to higher homeownership rates in the future, currently at 63.6 percent, according to the U.S. Census Bureau, a slight uptick from the 51-year low of 62.9 percent in the second quarter of 2016.
For more information on TransUnion’s rental reporting services, visit http://rentalscreening.transunion.com.
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CORRECTIONS: An earlier version of this post incorrectly called the study a survey and said the 55 percent figure applied to non-homeowners shopping for a home.