Restoring the American Dream for Millions of Underserved First-Time Home Buyers
The American Dream of homeownership is out of reach the majority of first-time home buyers. The hurdles facing first-time homebuyers are higher now than at any point in recent memory as high interest rates and lender risk-aversion will continue to block the path for millions of Gen Z and millennial first-time home buyers who must rely on traditional mortgage programs for financing. Now there’s a light at the end of the tunnel. CUSOs, CDFIs and credit unions that offer Home Diversification Mortgages can open the door to homeownership by offering risk-free first-home buyer financing with zero down payments and no Private Mortgage Insurance. Here we take a close look at Home Diversification Mortgages as a tool for CDFIs, CUSOs and credit unions to expand their reach and grow market share with younger members while driving social and economic impact.
KEY TAKEAWAYS
• Credit union mortgage lending is a vital path to homeownership and financial security for millions of American families.
• Millions of first-time and Gen Z and millennial home buyers are not adequately served by traditional mortgage programs such as conventional and FHA loans and for millions of low- and moderate-income households, the dream of homeownership remains out of reach.
• The 2025 edition of Credit Gauge from VantageScore signals growing financial strain among borrowers, some of which is driven by mortgage debt. For Credit Union, CUSO and CDFI mortgage loan originators these credit trends highlight a shifting financial landscape as rising delinquencies and growing debt burdens impact borrower eligibility.
• Home Diversified Mortgages provide a transformative solution and extraordinary benefits for CUSOs, Credit Unions, and Credit Union Member-Borrowers.
THE PLIGHT OF THE FIRST-TIME HOMEBUYER
According to the National Association of REALTORS®, prior to 2008 the share of first-time homebuyers was at an historical norm of 40 percent of all buyers and the typical first-time home buyers were in their late 20s. In comparison, by 2024 first-time home buyers shrunk to an historic low of just 24 percent of all buyers while their median household income grew by $26,000 to a high of $97,000. In 2024 the median age of first-time homebuyers reached an all-time high of 38 years old.
Those were the lucky ones – the borrowers with acceptable credit who were able to qualify for high rate mortgages and afford private mortgage insurance premiums in addition to their amortized loan payment.
“Owning a home is the signifier of economic success, but over the last few years, that milestone has gotten farther out of reach for first-time homebuyers. As affordability has worsened, homebuyers have gotten older and fewer are first-time homebuyers…The wealth gap between homeowner and renter households is widening. If this is left unchecked, it could lead to a society where economic success is increasingly determined by birth circumstances rather than hard work and merit, thereby undermining the very essence of the American Dream. Affordability is at nearrecord lows as mortgage payments for the median-priced home have reached historic highs. As home prices climb further and further out of reach, first-generation homebuyers trying to break into the market must rely on increases in their earnings to increase their buying potential. However, high-paying jobs tend to be in cities with the highest priced housing – places like Boston, New York, San Francisco, San Jose, and Los Angeles where fewer than 10% of listed homes are affordable to households earning the median income. This puts first-generation homebuyers in an impossible position where aspiring home buyers have to stay renters even longer in order to become financially able to buy a new home”.
THE FINANCING CHALLENGES FACING UNDERSERVED FIRST-TIME HOMEBUYERS
Young people are having a particularly hard time in the housing market. According to the January 2025 edition of CreditGauge from VantageScore, mortgage debt is the primary driver behind rising credit balances. Consumer credit delinquencies reached their highest level in five years, driving down credit scores. For millions of low- and moderate-income households, the dream of homeownership remains out of reach. Borrowers face steep barriers, primarily:
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