Source: Missing Ingredient for Millennials: Down Payment Savings
Author: Josh Boak
Millennials are a generation with many economic options in their favor.
However, there is challenge that faces this generation unlike any other. Navigating a time in the economy when debts are higher, savings are shorter, housing prices are spiking, pay increases are stalling, and credit is harder to attain. It is not surprising that even millennials who have persistently saved for a down payment on a house fall far short of the amounts needed to live the American dream.
In his article, Missing Ingredient for Millennials: Down Payment Savings, author Josh Boak cites a national study determining 37 percent of millennials who rent have yet to save anything at all for a down payment, yet over three-quarters absolutely hope to one day own a home. This highlights a vast gap between future aspirations and current actions.
Further troublesome is the fact that parents of millennials who have in the past been able to assist children with a down payment or at least co-sign on a loan, are no longer able to do so due to their own job and financial instability. This is a double hit for millennials who may not have the credit available to obtain a mortgage and now no longer the parental financial support.
Because of the lack of savings needed for a down payment, as well as entering the job market with heavy student debt, the author raises the question if this will impact millennials to delay home buying as well as marriage and children. The article cites research by the National Association of Realtors whose survey noted fifty-three percent of current homebuyers had indeed delayed the purchase of a new home due to student loan debt.
One a positive note, the author offers options available to millennials which are working in some markets. One option is a smaller down payment paired with mortgage insurance or a higher interest rate. Other options are to purchase a home in less pricey metro areas which would take less time to save for a down payment. Other options include Federal programs such as Fannie Mae’s HomeReady program for first-time homebuyers which allow for a three percent down payment instead of the usual twenty percent.
Millennials face economic challenges like no other generation. However, with their strengths as whole and emerging options available to homebuyers, it may be possible for them to live the American dream of home ownership.