Aspiring homebuyers with medical debt are more likely than others to be denied a mortgage, while those with student loan debt more often put off buying. That’s according to the fourth annual Zillow Report on Consumer Housing Trends, released this morning.

Personal debt – particularly credit card, student loan and medical – significantly impacts the type and features of home someone can afford, their timeline for buying a home, their ability to afford an adequate down payment and, ultimately, whether or not they are approved for a mortgage, according to the report, which asks 13,000 U.S. household decision makers aged 18 and older about their homes and homebuying decision-making.

More than two thirds of renters have debt, and about a quarter of renters and homebuyers said their debt caused them to be denied either a rental agreement or a mortgage at some point. That impact was most commonly reported by those with medical debt. Nearly two-thirds of renters and 44 percent of homeowners with medical debt said they couldn’t cover an unforeseen $1,000 expense. That’s compared to about half of all renters and one-fifth of all homeowners.

Type of buyers’ debt
Credit card 42%
Student loan 20%
Medical 16%
None of these 44%
Net: any debt 56%

Half of renters and 39 percent of buyers said student debt led them to delay buying a home. And once they do, it impacts how much they are able to put down, ultimately affecting their monthly budgets for decades. Two-thirds of buyers with any kind of debt put down less than 20 percent when they secure a mortgage, compared with 40 percent of buyers without debt. The share is even higher (76 percent) for buyers with student debt. Putting down less than 20 percent, while fairly common for first-time buyers, not only increases monthly payments but also can lead to added expenses if a lender requires private mortgage insurance or other upfront fees to compensate for the added risk.

And for those burdened with debt, financial sacrifices are common – 73 percent of renters and 68 percent of buyers with debt said they made at least one financial sacrifice to afford their home, compared with half of renters and 39 percent of buyers without debt. The most commonly cited lifestyle changes were reducing spending on entertainment, picking up additional work, cutting back on vacation and decreasing spending on technology. Those in debt also are more likely to go over their homebuying budgets.

“When we focus on low unemployment and the strong economy, we often forget that in many ways the rising costs of life can erode most of those gains,” Skylar Olsen, Zillow’s director of economic research, said in a statement. “Health care has never been more expensive. Getting a college degree, a path more likely to lead to economic success for those able to get through it, has never been more expensive. U.S. housing values and rents have never been more expensive. While incomes, both at the high and low end, are growing, the pace hasn’t kept up with those crucial life expenses. That’s fact and Americans are feeling it.”

Said debt was the reason for a mortgage or rental denial[i]
Student loan Credit card Medical
Buyers 28% 22% 38%
Renters 24% 26% 39%

[i] Among those who said they have each type of debt.