2016 Young Americans Credit Troubles

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2016 Young Americans Credit Troubles

2016 Young Americans Credit Troubles: Low FICO Credit Scores

2016 Young Americans Credit Troubles is a topic that is definitely worth looking into if we would like to forecast what direction our youth are taking.  It is becoming more and more evident that college grads and even adults through their 20’s are being saddled by low credit scores which will definitely have an impact on them and the economy moving forward.  As more and more reports come out showing the statistics of 2016 Young Americans Credit Troubles, we can see that according to FICO, a majority of the 18-29 age bracket has a FICO credit score of 699 or less.  What this would mean is that a majority of the young Americans looking to buy a home with a conventional loan will not get the best possible interest rate and will end up paying more over the course of the loan.  Granted these potential borrowers can always go to an FHA Loan Program where they can get the lowest interest rate with a substantially lower FICO credit score and with only 3.5% down payment.

2016 Young Americans Credit Troubles: Debt

2016 Young Americans Credit Troubles can also be attributed to the cost of going to college and the earning potential of the degrees they are leaving college with.  When college graduates have $100k+ in student loan debt and they are only working at jobs making $50K per year or less, they are going to find themselves in a world of hurt with regards to debt to income ratios and trying to save enough money for a down payment.  This age bracket is going to have a difficult time finding the purchasing power to actually buy a home considering they are going to be saddled with student loan debt, if not credit card debt as well.  If their finances are tight, this age bracket is also finding themselves using credits more than ever before, and keeping higher balances on them as well.

2016 Young Americans Credit Troubles: FHA Increase?

There could be a way that 2016 Young Americans Credit Troubles could benefit one entity, and that is FHA and their home loan program.  Given the very forgiving loan requirements, individuals can obtain a an FHA loan with a 500+ credit score with a 10% down payment.  With a 580 FICO credit score a borrower can get a mortgage with 3.5% down payment but only with a 43% back-end debt to income ratio.  What this means is all your monthly debt obligations can only equal 43% of your monthly gross income.  However, if you can get to a 620 credit score you can get an FHA Loan with a 56.9% back-end debt to income ratio.  As you can see, the credit score is still fairly low, however a home loan is in reach with an also low 3.5% down payment as well as a 56.9% debt to income ratio.

2016 Young Americans Credit Troubles: Conclusion

As you can see 2016 Young Americans Credit Troubles is definitely an issue that is going to have to be dealt with by the younger generation, but there might just be enough programs available for these individuals to become homeowners without having to live with mom and dad for years.  Am I a psychic, no, but we shall see what is in store for us over the next 3-5 years.  If you’d like more mortgage and real estate info visit my website www.loanconsultants.org.

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