Personal Finance

Good News for Home Buyers: Data Show 49% Decrease in Home Loan Denials

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Cheerful couple receiving keys to their new home

When it comes to maintaining our financial health—managing your various accounts, making months payments on time, and bolstering your credit score—it’s easy to get stressed out. In fact, Americans are more stressed out about money now than ever before, and the volume of debt you’re carrying can be a major factor in that anxiety. 

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But is having debt always a bad thing? 

That’s the question Upgraded Points asked in a recent analysis of household debt data from the Federal Reserve Bank of New York, exploring scenarios where taking on debt can actually be beneficial for your finances.

Particularly where home ownership is concerned, their study found that the number of families applying for home loans has increased, and the number of families being denied for home loans has significantly decreased. Of course, the rate you secure on your mortgage matters, too, and some states seem to average far better rates than others. 

Differences in Debt

Across the U.S., the average family had $33,680 in mortgage debt in 2018, but homeowners in some states owe significantly less money. In West Virginia, the average mortgage debt in 2018 was 15,430, followed by $15,710 in Mississippi, and $18,260 in Arkansas. 

While the total amount of debt in America has hit record highs in recent years, one state saw a decrease in mortgage debt, specifically between 2003 and 2018: Michigan. Decreasing by 3.4 percent overall, Michigan mortgage debt resisted an increase despite the cost of homes increasing by more than $100,000 on average since 2011. 

Related: 8 Tips for Millennials to Ditch Their Debt Fast

Although the average mortgage debt increased by over 40 percent between 2003 and 2018, families in many states experienced much lower increases to the amount of mortgage debt they took on. Including Michigan, mortgage debts saw the lowest increases in Ohio, Georgia, Indiana, and Nebraska, ranging from 11 percent to 24 percent. 

Shifts in the Housing Market

Between 2018 and 2019, there was a 10.5 percent increase in home-based loan applications, and the rate of denials decreased by nearly 49 percent. In 2018, while close to 15 percent of home loan applications were turned down, fewer than 8 percent of applications were denied in 2019.

And those reports that suggest young people aren’t buying homes? Take those with a grain of salt. Between 2018 and 2019, it was Americans over the age of 60 who saw a decrease (10 percent) in their home loan applications, while Americans under 40 applying for home loans increased by over 12 percent. 

Related: 5 Types of Real Estate Financing to Consider

Weighing Your Options

Debt is never something that should be taken lightly, but the truth is that not all debts are created equally. The high interest rates commonly attached to credit cards or personal loans can certainly be stressful, but the same isn’t necessarily true for mortgage debt. 

According to the analysis from Upgraded Points, Americans are applying for more home loans and getting denied less. Even better, some states average lower increases in total mortgage debt over the last 15 years, indicating there may be some places in the U.S. where it’s simply even better to be a homeowner. 

Is this data surprising or in line with what you’d expect?

Weigh in with a comment below.

Jamie Greenberger is an Assistant Editor in the homes and real estate industry. With 2+ years experience in copywriting, editing, and research, she offers a fresh take on the real estate industry. ...
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    Remington Lyman Real Estate Agent from Columbus, OH
    Replied about 1 year ago
    Thank you for the great read!
    Dylan H. Rental Property Investor from Savannah, GA
    Replied about 1 year ago
    These are definitely interesting numbers, thanks Jamie! It's not really enough to really analyze the market though. A lot of other questions and statistics need to be analyzed in order to see whether things like this are 'good', 'bad', or simply meaningless. For instance, how does the debt correlate with inflation, quality of applicants, changes in baseline mortgage qualifications, etc... A good DID (difference in differences) regression can be really useful when analyzing data like that. Nevertheless, thanks for the article!