In a recent letter to millennials, Jonathan Smoke of describes the biggest obstacles preventing millennials from homeownership. He nailed down four factors that are giving millennials the most cause for concern:

  • Student Loan Debt - This can cause problems when trying to secure a mortgage, because "in order to get a qualified mortgage, you need a DTI of no more than 43%, so a very large student loan balance could disqualify you right off the bat."
  • Credit Score - Given that history is one of the largest factors in determining credit scores, caution is necessary because "the average FICO score for a millennial with a mortgage this year is 714" whereas the average score of an American is 695.
  • Down Payment - While having that 20% down payment is ideal, "the average millennial this year could only put 7% down." Smoke suggests aiming for a 10% down payment and saving as much as possible.
  • Rents Are Rising - Many millennials are concerned with rents that keep rising faster than incomes:  "the majority of renters in the U.S. now have to spend more than 30% of their income to rent a typical home, and that means they're starting to sacrifice spending in other areas such as food and health care."