As the mortgage industry undergoes significant changes, a new study from Experian shows that nearly half (47%) of renters in America believe they’ll be ready to buy a home within the next four years; Gen Zers (48%) and millennials (50%) lead the way.
If that timeframe is extended to the next eight years, the number of expectant homebuyers jumps to 67%, according to the study, Experian said.
The Experian study, which surveyed 2,005 adults online, follows the Federal Housing Finance Agency’s (FHFA) recent approval of VantageScore 4.0 software for use in mortgage decisions.
First to Include Positive Rent Payments in Credit Score
VantageScore considers rental payments and other forms of alternative data, making it beneficial for renters who pay their bills on time but may have limited credit histories. VantageScore was created by the three major credit reporting agencies: Equifax, Experian, and TransUnion.
Experian is the first credit reporting agency to include positive rent payments in credit reports, and operates the industry’s largest rental database.
“As an industry, we have an important role to play in helping close the homeownership gap and making the dream of owning a home a reality for more consumers, including current renters and younger Americans who represent a powerful segment of future homeowners,” said Michele Bodda, President for Experian Housing, Verification Solutions, and Employer Services. “With the adoption of modern tools powered by Experian’s worldclass data assets, including positive rental payments, we can take meaningful steps toward making homeownership more attainable to more consumers more of the time.”
Experian recently announced it would be offering VantageScore® 4.0 scores at no cost to its U.S. mortgage clients, which should ultimately make homeownership more accessible for aspiring homebuyers.
Barriers to Home Ownership
According to Experian’s study, the biggest barriers to homeownership for current renters are funds for a down payment (67%), home prices (66%), and low credit scores (51%)
Nearly 40% of renters rate their understanding of financial concepts tied to homeownership as “fair” or below.
While around 60% of today’s renters have near-prime or better scores, Experian’s latest State of the U.S. Rental Housing Market Report shows nearly a quarter (23%) have been denied a mortgage or rental application because of their credit score.
Renters stated that financial support (61%), a clearer understanding of what they quality for (51%), and more financial knowledge of what they can quality for (38%), would be most useful for their homeownership journey.:
“We know today’s renters are hungry for more knowledge, with many turning to friends and family and online resources to improve their understanding of financial concepts,” said Christina Roman, Consumer Education and Advocacy Manager at Experian. “Our goal is to be an educational resource and help consumers, including renters who are eager to own a home, improve their financial lives. We have many tools available to support consumers and bring them closer to their dreams of homeownership.”
