For decades, owning a home has been a staple of the American dream. Whether it is a high-rise condo in the city or a single-family home with a yard and a porch, Americans strongly agree that homeownership is an incredibly effective stepping stone toward building both wealth and financial security over the long term. And for those who can accomplish homeownership early on in life, having a residential property under your name offers opportunities for growth throughout a lifetime.
Millennials have not deviated from the home-buying aspirations of generations before them, but the path to homeownership seems longer and more uncertain in today’s economic environment.
The financial disaster that struck in 2008 has left a hard-to-shake feeling of despair in many when it comes to owning a home. Especially the younger generation who’s now aware (and afraid) of financial catastrophe prompted by real-estate financing and investing mishaps. Not only have Millennials lived through the housing distress of their parents, but they are left with the feeling that homeownership comes with a plethora of hurdles.
Here’s what holds the younger generation back from pursuing homeownership, and the steps that can be taken to overcome those obstacles in a financially savvy way.
Currently, more than 40 million Americans have some degree of student debt they are actively paying off, amounting to more than $1.3 trillion owed. The graduating class of 2016 averaged student loan debt just north of $30,000 – an amount that seems unmanageable for those just starting their professional journeys. Instead of plugging away at saving for short- and long-term goals, homeownership included, Millennials are hyper-focused on paying off student debt sooner rather than later.
That means delaying or altogether forgoing getting the keys to their very own residence.
Even though pursuing higher education has traditionally been a step in the right direction toward earning more earlier in life, walking out of the dorm room to a high-paying salaried career has been far from the norm for recent grads. Instead, they’re met with lower-wage entry-level positions without many prospects for moving up the job ladder quickly.
Company benefits in some private sectors have also faded away, making it harder to put savings for a home at the top of the financial to-do list each month. Facing the need to sock away more for retirement out of their own pockets and paying higher insurance premiums from the start makes coming up with down payment and closing costs a seemingly impossible challenge.
It may seem a little doom and gloom for the younger generation given these less than ideal circumstances, but there’s hope yet for those who want to own a home in the near future.
Many don’t recognize that the financial crisis and subsequent recession brought about some changes to the lending landscape that work to a home buyer’s benefit. First, several financial institutions created or re-engaged programs to help borrowers achieve their homeownership goals quicker than they might otherwise be able to. These programs offer lower down payments, meaning the traditional 20% of the purchase price is no longer required to get into a home. Some even provide assistance with closing costs to help ease the financial burden for low- to moderate-income home buyers.
In especially high-cost real estate markets like the Bay area and other flourishing metropolitan cities, needing less out of pocket makes all the difference between being able to save toward buying a home and missing the proverbial ownership boat.
Millennials also have more choices than ever when it comes to finding the best-fit lender. Gone are the days when a prospective buyer had to visit a handful of mortgage companies in person to find the best financing solution. Instead, applications can be submitted online, and with the best lenders, borrowers know exactly what they qualify for without leaving the comfort of their living room. And, expert lenders offer dedicated help to new or younger borrowers looking to buy their first home or upgrade to the next through experienced mortgage advisors.
Not only do homebuyers have access to affordable mortgage rates, but they also have the opportunity to truly understand which mortgage options and buying programs work best based on their unique situation.
In the ever-changing world of real estate, interest rates, and broad economic shifts, buying a home has remained a steady piece of the financial puzzle for millions of Americans. Millennials have had some curve balls thrown their way, making it seem as though homeownership is out of reach, but the dream can still become a reality with the right financial partner and some methodical financial planning.
If you’re ready to see how SnapFi can help you buy your first home, upgrade to the next, or refinance your current, get in touch with us today.
Image courtesy of Toa Heftiba and Karina Carvalho