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As more and more millennials reach the age where they’re thinking about buying their first home, the dire prediction that they’ll be overwhelmed by student loans or cravings for expensive foods like avocado toast have to qualify for a mortgage, it has not yet been achieved. According to a new study, Millennials (ages 18-34) plan to buy homes in the next five years at significantly higher rates than Generation X (ages 35-54) or baby boomers (55+).
Smart Millennial Uses Down Payment Assistance For New Home
Coming up with a lot of money for a down payment is one of the biggest obstacles to owning a home. To find out what millennials and other generations of Americans know about down payments, how they overcome these obstacles, and what else might be holding them back from buying a home, we recently conducted an online survey of more than 2,000 American adults. Done by Harris. polls
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Mortgage expert Tim Money says: “This study shows that there is a lot of variation in how much to save for a down payment, although that’s probably understandable given the variety of loan options available today.
“It also shows that people are finding creative ways to accumulate these advances — and for millennials in particular, they’re even making sacrifices like delaying marriage and having children to save that money.”
There is a common belief that the amount required for a mortgage down payment is 20% of the price of the house. While the 20% down payment required to get a mortgage is conventional and does not pay private mortgage insurance or PMI, it is very hard and fast to qualify for a mortgage. VA loans do not require a down payment. Fannie Mae and Freddie Mac have a 3% reduction plan. FHA loans allow for down payments as low as 3.5%. Many banks and online lenders now offer low down payment mortgages. And some state and local governments offer cash-advance assistance programs to residents.
Despite the low availability of down payment options, nearly a third of Americans (29%) believe that exactly 20% is required for a down payment. Among generations, 21 percent of Millennials believe it is necessary, as do 27 percent of Gen Xers and 36 percent of Baby Boomers.
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“While the highest proportion of millennials have a very specific view of how much is currently needed for a down payment — 24% of millennials think you should only put down 6% to 10% — the same nearly identical percentage of 23 % Is. Millennials think you should put away more than 20%. While it’s hard to say whether this means millennials are smart or confused about down payments, there’s definitely misinformation and confusion among millennials about how much money is actually needed to buy a home.
We asked what assets people used—or expected to use—to get a down payment (respondents could choose from multiple options).
Among those who bought a home in the past five years and do not plan to buy in the next five years, 59 percent used personal savings for some or all of their down payment. 65% of millennials say they do, while 51% of Gen Xers and 61% of baby boomers say the same.
Of Americans planning to buy a home in the next five years, 66 percent said they would use personal savings for a down payment. Millennials are more likely than Gen Xers to say this: 74 percent of Millennials plan to use personal savings, compared to 58 percent of Gen Xers.
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Millennials are also more likely than other generations to say all or part of their down payment comes from a spouse or partner’s personal savings: 37 percent of millennials say so, compared to 23 percent of Gen Xers and 17 percent of baby boomers.
Of those who bought a home in the past five years, 28 percent used their spouse’s or partner’s savings for a down payment. More than a third (34%) of recent millennial buyers rely on their spouse’s savings, while 24% of Gen Xers and 25% of baby boomers do the same.
Gifts from family members play a role in some cash advance programs. Among those who plan to buy within five years, 14 percent of millennials say they would use a family gift as a down payment, compared to just 10 percent of Gen Xers and 4 percent of baby boomers. they do.
Among those who shopped in the past five years,  exactly 14 percent of millennials used family gifts—the same proportion as potential buyers—while about 1 in 5 Gen X and new baby shoppers (19 percent) They use family gifts.
Average Down Payment On A House In 2021
According to our survey, millennials spend the most time saving for a down payment. Members of this generation who bought a home in the past five years reported that it took them an average of 3.75 years to save for their down payment, compared to 3.42 years for Gen Xers and 2.75 years for baby boomers. It took a long time. ]
A 2016 survey of consumer spending by the Bureau of Labor Statistics showed similar results. Millennials save $7,624 annually while Gen Xers save $12,347 annually. Assuming a 10% down payment to buy a $323,300 mortgage, it would take millennials 4.2 years to save and Gen Xers 2.6 years to save. The data from this survey cannot be applied to the “average” baby boomers because most of them are retired and not earning and saving at the same rate as other generations.
According to our survey, 68 percent of Americans who are currently homeless report that something is preventing them from buying a home. There are stark differences between the generations: Only 42 percent of baby boomers report barriers, compared to 73 percent of Gen Xers and 82 percent of millennials.
The main problems mentioned were not having enough money for a down payment (44%) and debt (29%).
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The biggest problems millennials face when buying a home – issues like not having a down payment (50%), debt (35%), not being able to find affordable housing in the area they want to live (35%) and fear From lack of financial stability after purchase (34%) – very similar to the Gen X barrier.
However, there are several factors that millennials report more often than other generations as preventing them from buying a home.
A person cannot buy a house in the area where he wants to live. More than a third of millennials (35%) report this problem, compared to 25% of Gen Xers and 19% of baby boomers. Another challenge that millennials face more than older generations is finding a home that meets all of their wants and needs: this problem affects 19 percent of Millennials, compared to just 7 percent of Gen Xers and 7 It affects the percentage of baby boomers.
According to a 2017 study by Experian, student loan debt in the United States has reached a record $1.4 trillion, and millennials carry more student loan debt than any other type of debt. Additionally, student loan debt affects Millennials at a higher rate than any other generation: 19 percent of Millennials say their student loans are a barrier to homeownership, compared to 11 percent of Gen Xers and only 3 percent of the young generation.
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Despite the barriers to homeownership, millennials are buying their first home at a younger age than older generations. Among Americans who bought their first home, the average age at which they bought their first home was 29.4 years. For millennials, it’s 25.2. For Generation X, the average age is 29.4 years, and for Baby Boomers, the average age is 30.4 years. More than a third of millennial homebuyers (35%) bought their first home between the ages of 18 and 24, compared to 19% of Gen Xers and 23% of baby boomers.
Of Americans planning to buy in the next five years, 79 percent said they would sacrifice savings for a down payment.
Younger shoppers are more willing to make sacrifices to save: Only 59% of those who plan to buy in the next five years say they would, compared to 90% of Millennials and 77% of Gen X. (Of course ., may be because older Americans have equity in their home that they intend to use for their next down payment.)
When it comes to some trade-offs, millennials are more likely than older generations to say they’re willing to give up certain things to save for a down payment.
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According to the survey, 59 percent of millennials are willing to skip vacations, compared to 45 percent of Gen Xers and 45 percent of millennials. Forty-two percent of millennials prefer to make coffee at home rather than buy it, compared to 34 percent of Gen Xers and 29 percent who buy it.
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