As household debt declines, prospective homeowners have a better shot at obtaining the mortgage they want

No wonder the housing market hasn’t made a really robust recovery: There’s a $11.38-trillion weight in the way.

Collectively, American households owed $11.38 trillion in student loan debt, credit card balances, auto loans, mortgages and equity loans in the second quarter of this year, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit.

To be sure, that’s a big number, but it’s down $1.3 trillion since the peak of indebtedness in the third quarter of 2008.

“The fact that overall debt is trending downward is a good omen for the future,” says Scott Hoyt, senior director of consumer economics at Moody’s Analytics.

“If we don’t borrow today, we have more to spend tomorrow,” he explains.

Many, however, don’t borrow today because they simply can’t. Case in point: A Federal Reserve study released at the beginning of this year finds that 9 percent of 29- to 34-year-olds got a first-time mortgage from 2009 through 2011, compared with 17 percent ten years earlier.

Students are graduating now with about a $25,000 average loan debt, notes Fred Amrein, a Wynnewood, Pa., fee-only financial planner who specializes in education funding.

Although federal loans offer repayment plans that can ease the monthly payment, “it can be complicated for graduates, because many have several different loan types,” Amrein says.

Still, the fact that people haven’t taken on significant new debt, and the recession has prompted some to more diligently pay down existing debt has boosted the FICO credit score – the number mortgage lenders use to evaluate borrowers – of a sizable portion of consumers. “The average FICO score has stayed constant at 690,” notes Anthony Sprauve, FICO spokesperson. Some consumers’ scores have been badly damaged from foreclosure or other woes, but others have improved their scores, explaining why the average has remained constant.

Lenders offer better rates on mortgages to those with good scores, says Keith Gumbinger of the mortgage data firm, hsh.com. The lower the mortgage rate, the lower the monthly payment, he adds, and that’s a combination that makes home buying easier.