Unqualified: Young Debtors Struggle Get Mortgages

One clear path to retirement security is to buy a home early in life and pay off it before you retire -- at which point you can either live there at a pretty low cost or cash out and use the wealth to help cover living expenses in a cheaper place.

But this path is not so easily traveled nowadays. While the average first-time homebuyer was in their early twenties in the 1960s -- meaning they could knock off a mortgage by their fifties -- the average now is 31-years old. And, in more expensive urban areas, the age is considerably higher -- meaning that more Americans will still be paying mortgages when they are retired.

Now this problem is set to get worse, according to a new analysis by the Young Invincibles about how student debt can make it difficult for young buyers to qualify for a mortgage. The analysis compared average student debt loads with average salaries, and then looked at the debt-to-income ratio that home buyers typically need to qualify for a mortgage.

The result? As student debt levels have risen -- and yet salaries haven't -- fewer young adults are likely to qualify for a mortgage, especially ones who are single: 

A single person leaving school with the average debt will be severely limited in home purchasing capability. In fact, student debtors making the median salary for college graduates will struggle to qualify for the median mortgage for first-time buyers. Given that about one-third of homebuyers are single, and about 38 percent of first-time homebuyers are single, this limitation has the enormous potential of cutting off options for the growing number of single homebuyers.

This problem has worsened in the past decade: "The average single debtor in 2002 with the median amount of debt would have a debt-to-income ratio of .43 compared to .49 today."

Yet being in a couple didn't necessarily solve the problem, the analysis found, if your partner also has student debt. So the key to the American dream, it turns out, may be to marry someone who didn't take out student loans. But good luck landing such a mate: According to the Project on Student Debt: "Two-thirds of college seniors graduated with loans in 2010, and they carried an average of $25,250 in debt."

And as we all know, these loans don't disappear quickly. According to a recent survey:

Nearly half (47 percent) of adults ages 35-44 with a student loan balance report their current balance is more than $20,000, while 34 percent of adults 45-54 are still carrying more than $20,000 in debt.

What this means is that buying a home is not just getting tougher for recent grads with student loans; it's getting tougher for all young adults, as student loan debt hangs around seemingly forever.

And I do mean forever: as we recently reported here, many seniors are now seeing their Social Security checks garnished to collect unpaid student loans.