How Credit Scores Impact Generations’ Ability to Invest in a Home: What a Trump Presidency Could Mean for Housing Policy

Homeownership has long been a cornerstone of the American Dream, but for many, the path to purchasing a home has become steeper in recent years. One of the biggest obstacles? Credit scores. These seemingly small numbers hold significant weight in determining access to mortgages, interest rates, and overall affordability. However, in the wake of the 2024 election, with Donald J. Trump securing his second term as President, the housing market and related financial policies are expected to undergo important shifts. Here’s how credit scores are impacting generations’ ability to invest in a home—and what changes we can expect under a Trump presidency.

Credit Scores and Their Growing Influence on Homeownership

For many Americans, credit scores are the key determinant of whether they can purchase a home and, more importantly, the terms of that purchase. Credit scores—which range from 300 to 850—are used by lenders to gauge the risk of lending to a borrower. A lower score often leads to higher interest rates, which ultimately means higher monthly payments and a more expensive long-term investment in a home.

The generational divide in homeownership is clear. Younger generations, like Millennials and Gen Z, often face significant challenges when trying to secure mortgages. Many of these buyers are still building their credit, saddled with student debt, or simply lack the financial stability needed to qualify for traditional loans. As a result, they often struggle to afford homes, particularly in competitive markets with rising prices and interest rates.

For older generations, such as Baby Boomers and Generation X, securing a mortgage may be less of an issue. However, they still face challenges—especially when refinancing their existing homes at favorable rates. Regardless of age, credit scores continue to be a major factor in accessing affordable homeownership options.

The “Lock-In Effect” and Interest Rate Declines

In the aftermath of the COVID-19 pandemic, interest rates dropped to historic lows, particularly in 2021. This period of low rates caused what is known as a “lock-in effect“: homeowners with low-rate mortgages were hesitant to sell their homes, knowing that purchasing a new home would come with significantly higher rates. This resulted in fewer homes on the market, which in turn caused prices to rise.

Now, with interest rates declining from their 2021 peak, there is some hope for a more balanced housing market. However, credit scores still play a key role in the refinancing process. Even as rates decline, many homeowners may find themselves unable to refinance due to less-than-ideal credit scores. This continues to limit the number of homes available on the market, contributing to the ongoing housing supply shortage.

A more accessible housing market, one where more homes are available for purchase and more people are able to refinance, would certainly benefit the economy. It’s a classic case of supply and demand: a healthier housing market means more people buying and selling homes, which supports overall economic activity. But in order to get there, issues surrounding loan balances, credit scores, and income need to be addressed.

Federal Legislation Impacting Home Loans: FHA, VA, and USDA

Several federal loan programs are designed to help people with less-than-ideal credit access homeownership. These programs are particularly important as credit scores continue to impact eligibility for traditional loans. Under Trump’s leadership, we can expect continued support for these programs, with an emphasis on expanding eligibility and streamlining processes:

1. FHA Loans: The Federal Housing Administration insures loans for people with low credit scores, allowing them to purchase homes with as little as 3.5% down. These loans remain a critical resource for first-time homebuyers, and under Trump’s administration, we may see efforts to make the application process more efficient and accessible, potentially allowing more people to benefit from these programs.
2. VA Loans: VA loans provide active-duty military members, veterans, and their families with no down payment and no mortgage insurance requirements. Trump, a strong advocate for military families, is likely to continue supporting this program, ensuring that veterans have continued access to affordable home loans with minimal financial barriers.
3. USDA Loans: For those living in rural or suburban areas, the U.S. Department of Agriculture (USDA) offers loans with no down payment and flexible credit requirements. These loans can provide a crucial pathway to homeownership for those in less densely populated areas. Expect to see continued support for USDA loans as part of Trump’s broader strategy to improve rural economic development and access to housing.

Lower Down Payments: The Shift in Affordability

The idea of a 20% down payment for a home is rapidly becoming outdated. Over the years, government-backed loans, such as those from the FHA, VA, and USDA, have allowed homebuyers to secure mortgages with much lower down payments—sometimes as low as 3%. This shift has made it easier for many people, particularly first-time buyers and younger generations, to purchase homes.

However, as affordable as lower down payments may be, credit scores remain an obstacle. While government programs can help reduce the upfront costs of homeownership, they still require a certain level of creditworthiness. This means that even with lower down payments, many Americans are still shut out of the housing market due to poor credit.

Conclusion: The Future of Homeownership Under a Trump Presidency

As we move further into 2025, it’s clear that credit scores will continue to be a defining factor in the ability to purchase a home. While some improvements may be on the horizon under Trump’s economic policies, including lower tax burdens and expanded housing programs, the core issues—rising home prices, high-interest rates, and credit score disparities—will likely remain.

That said, Trump’s push for deregulation, private investment in housing, and expanded access to federal loans could help alleviate some of the pressure on the housing market. In the end, a healthier housing market—one where more people can afford to buy and refinance homes—will depend on a balance of economic growth, government intervention, and private sector solutions. For younger generations, the future of homeownership will likely hinge on both improving credit scores and navigating the shifting landscape of housing policies and loan options.