Why Millennials Still Have Difficulties Finding a Home
Today the class that has the biggest impact on our economy is the millennial class. This group, roughly aged between 18 and 34 has replaced the so-called Baby Boomers as the ones that buy more things and spend more money. Baby boomers are retiring and saving their money. Yet the real estate industry has been keeping a keen eye on millennials and wondering when they’ll start buying their first home. Why is there a perception that millennials are sitting on the sidelines instead of actively searching for real estate?
One big factor is saving up for a down payment. Millennials can go shopping for a home but once they’re told how much down payment they need to have as well as how much closing costs will be, they have to rethink their plan. Rents are up in most areas of California and that means less money each month available to sock back in a savings account. Even for a loan down payment loan such as an FHA mortgage needing just 3.5% down, that’s still a considerable amount for most. On a $400,000 home, 3.5% is $14,000. And then there’s closing costs.
Student loan debt is also a factor. A college education is expensive and not everyone is blessed with having parents take care of some or all of attending college. That means student loans are involved. Any student can take out a student loan without any regard to credit history or ability to repay. The loans aren’t due while the student is in school but is due once the student graduates or otherwise stops attending. Coming up with enough funds to close on a transaction along with student loan payments keeps many at bay.
However, there are loan programs a lender has that can help address these issues including down payment assistance and grants. Lenders have access to such programs that can help with down payments and closing costs as well as provide certain lender credits to offset these fees. In addition, the lender can help guide the millennial borrower to establish a credit history. Once millennials discover there are solutions to their perceived road blocks, home ownership isn’t very far away.
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