57% of Middle-Income Renters Feel Homeownership Is Out of Reach

Homeownership feels out of reach for 57% of middle-income American renters, according to a survey by Neighbors Bank, which defined middle income as a household income of $40,000 to $125,000.  

Of all respondents, 44% said that although they earned more than their parents did at the same age, they couldn’t afford a similar lifestyle, including owning a home (not inflation-adjusted), and 24% said they’ve stopped saving for a down payment or never started. 

Still, 39% said that homeownership remains a goal for them, but it is less central than it used to be. 

What’s holding them back? 

Aside from not having/making enough money to buy a home, many middle-income respondents had misconceptions about homebuying in general: 

• They believed a median down payment of 20% was required to purchase a home. The Federal Housing Administration accepts a minimum of 3.5%. 
• They believed a median credit score of 675 was needed. The FHA accepts a minimum score of 580 with 3.5% down. 
• They believed they needed a household income of $88,000 to afford a starter home, but they made an average of only $63,000. For an FHA loan, lenders are typically more interested in a steady employment and income history than a set income level. 

So, what would persuade middle-income renters to pursue homebuying more seriously? 

• From lenders: 36% want lower or no down payment requirements. 
• From agents: 51% want to be walked through programs they may qualify for. 
• From policymakers: 47% want more affordable housing construction.