How millennials can overcome hurdles to homebuying

Your neighborhood is probably missing something.

You may feel it lacks sidewalks or stop signs, but what it probably doesn't have many of are millennials, a generation that generally includes those born between 1981 and 1996, according to the Pew Research Center.

At least, the statistics tell us there aren't as many young homeowners as there used to be. Thirty-six percent of American homeowners are 35 and younger, the lowest on record since 1982, when the census's Housing Vacancy Survey began tracking homeownership by age. Those age 65 and older have a much higher rate of homeownership – 80 percent – but that’s expected. The longer you live, the more time you've had to save and buy a house.

If you're in your 20s or early 30s and aren't a homeowner but wish you were, you may wonder what happened. Have you been doing something wrong? Are you stuck in your apartment or your parents' basement forever?

No – and probably not. Here are just some of the reasons you're probably not having much luck getting a mortgage.

You have a lot of student loans. There are numerous factors pushing against millennials' plans for homeownership, including the economic hangover from the recession, but student loans are a major obstacle. Even if a lender doesn't see your massive student loan debt as something that could prevent you from making a mortgage payment, plenty of potential homeowners do.

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"Most of us can't [buy a house] because of student loans and stagnant wages. If you're having to pay $400 a month to Sallie Mae, how are you supposed to save for a home?" asks Rachael Nichol, a 26-year-old social media manager in Atlanta who did buy a house last August.

Student loans have so far kept Michael McGinn from buying a home. "I'm 28 and haven't purchased a house yet because my fiancee has over $100,000 in student loan debt from nursing school," says McGinn, who works in public relations in New York City. "We will keep renting an apartment for at least the next five years until she pays it off. We figure we'll be able to secure a lower interest rate once that debt is off the books, and the extra time will allow us to increase our savings for a down payment."

You lack a credit history. Lenders may see you as a risk if you have no credit history, says Alex Vercheski, a real estate agent with Keller Williams Realty of Greensboro, in North Carolina.

"The best way to help yourself early on to be able to buy a home is to establish credit, as this is one of the biggest factors a mortgage company looks at," Vercheski says. "Get a credit card as soon as you turn 18 and start establishing credit.”

Keep in mind that the Credit CARD Act of 2009 made it difficult for anyone under 21 to get a credit card. It's not impossible, but you’d need to show proof of sufficient income to cover the credit obligations or get a parent or guardian to cosign your account.

And, of course, you need to be careful when using a credit card to establish credit. Too much credit card debt can make mortgage lenders wary. Millennials, on average, have less credit card debt than older generations, according to Experian's 2013 State of Credit Report. Millennials hold an average of $2,682 in credit card debt, compared with the average Generation X and baby boomer credit card debt of more than $5,000. But the average millennial is two to four times more likely to make a late payment than the older generations. So be careful out there.

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Your geography is an obstacle. If you graduated from college and flocked to a big city with a high cost of living, like New York City or Los Angeles, your location may be holding you back from purchasing a house.

"I'm in my late 20s and haven't bought, partly because I live in the San Francisco Bay Area," says Chad Reid, a director of communications for a marketing firm in Oakland, California. "I'm not sure I know anyone under 40 who owns here."

But it's another story elsewhere, Reid says."In my hometown of Cincinnati, a lot of my friends own, even those making equal or less money," he says.

Reid also sounds dubious about purchasing a house since he and his girlfriend enjoy living downtown. "We walk everywhere, and most places where we can buy a house, we'd be confined to driving a car to get groceries, do our banking and grab a drink," he says.

It's not them – it's you. Your ambivalence may be holding you back more than mortgage lenders. Katie Brewer, a Dallas-based certified financial planner with her own company, Your Richest Life, says a lot of her millennial clients tell her they don't want to be committed to one place and like keeping their opportunities open. "These people usually want to move somewhere else eventually, so they hesitate to put down roots in the area that they currently live in," she says.

The statistics may be depressing, but that doesn't mean you can't buy a home. Trying these strategies:

When it comes to lenders, think small.John Jones, 24, who works for a financial solutions firm, now owns a home in downtown Grand Rapids, Michigan, but struck out the first time he approached a mortgage lender. He requested a loan with his bank, a large institution, and thought that since he was a regular customer and the bank knew his financial history, he would be approved for a mortgage.

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"Not the case," Jones says. "I was declined, even with my good credit, more than 10 percent down payment, and a good job and debt-income ratio."

He did get a mortgage from a local lender, though, which may be a smart move for young, aspiring homeowners. Vercheski says he has had better luck placing his millennial clients in homes using smaller banks and credit unions.

"They're smaller and can work around situations with ease and less red tape," says Vercheski, who, at 21, is a millennial himself but isn't yet a homeowner. "I've found that most credit unions and local mortgage companies and banks understand the lack of credit history, and most will even give advice on how to quickly build a bit of credit to get that approval."

Consider an FHA loan.These loans are insured by the Federal Housing Administration and are for first-time homebuyers, although the FHA defines that as anyone who hasn't owned a house in three years. Generally, you'll need a down payment of at least 3.5 percent and a credit score of at least 580, although some lenders won't even begin a discussion unless you're in the mid-600s.

The downside? You will pay considerably more in insurance premiums than if you took out a conventional loan.

Shop around. This strategy worked for Jones, who could have given up after his own bank turned him down. You never know what you might find if continue to shop around for a lender, and you may learn that your state has a program designed to help first-time homebuyers.

"People are so afraid of having their credit pulled, but traditionally it does not affect a credit score a whole lot," Vercheski says. "Talk to as many lenders as possible, and see what specific programs they offer and what the best rate around is. And again, go in person to a branch office and speak directly with a loan officer."

It's worth a shot, and if you continue to get rejected as you try to improve your financial picture, at least you're in good company. You may not get a loan, but you aren't alone.

More from U.S. News:

• A Step-by-Step Guide to Homebuying 
• Should You Rent or Buy? 7 Questions to Help You Decide 
• The Newbie's Roadmap to Buying a First Home