No need to worry, Millennials. Homeownership isn’t as scary as you think!
Buying a home is a milestone event in anyone’s life. With it comes added responsibility, a sense of settling down, and in many cases, a family. Like any major event, the home buying process can come with some apprehension, especially amongst a Millennial generation that fears “getting old” like the plague. But buying a home should be an event you look forward to, not dread its arrival.
Yes, becoming a homeowner can symbolize a change in lifestyle for many, and it’s important to know if you’re ready for a home or not before you jump in. But many of the scary stories you hear about why you shouldn’t buy a home are unfounded myths. While you may not be ready to take the next steps toward homeownership just yet, we’re here to dispel these myths that may be holding you back for the wrong reasons and give you a better idea of whether you’re ready to take the leap.
Buying a home should be an event you look forward to, not dread its arrival.
Myth #1 – I NEED A BIG BUDGET
Many Millennials are shying away from buying homes because they simply don’t think they have enough money for it. The astronomical budgets of the couples on home buying and remodeling TV shows have shook Millennials to their very core. Seriously. Most people who are getting ready to buy their first home don’t have the $500,000+ budgets that these TV couples have access to, and that’s fine. The U.S. Census Bureau reported median home prices around $290,000–$320,000 between 2016 and 2018. This means that half of the homes in the U.S. fall below this price point. There are plenty of homes that fit your price range, you’ve just got to look for them.
Myth #2 – I CAN’T PAY OFF A MORTGAGE AND STUDENT LOANS AT THE SAME TIME
According to research done by American Student Assistance, 83% of Millennial renters with student loan debt said their loans are keeping them from homeownership. Student debt can certainly be a hindrance in the mortgage process, but shouldn’t keep you from your goal of homeownership if you proceed through the proper channels.
For instance, if you’re part of a Federal reduced-payment plan, make sure your lender calculates your DTI ratio based on your actual, reduced payment. Just last year Fannie Mae introduced rule changes to make securing a mortgage easier for people with student debt—and several states offer grants to help qualified college graduates buy homes and pay off their loans. If these options aren’t for you, you do have the option to refinance and extend your student loan term. Your payments will be lower, which will reduce your DTI ratio, but it’s important to consult a professional to figure out whether extending your loan is in your best financial interests.
83% of Millennial renters with student loan debt said their loans are keeping them from homeownership.
Myth #3 – I NEED A 20% DOWN PAYMENT
A 20% down payment is needed to avoid mortgage insurance, but it’s not always the best option for everyone’s financial situation. In fact, many experts are starting to challenge the long-standing notion that a 20% down payment is the ideal way to go about buying a home. It may sound counterintuitive, but some homeowners have found that taking on a bit more debt or temporarily paying mortgage insurance is the only way they could realistically afford a home. With home prices steadily increasing and wage levels remaining stagnant, saving up for that 20% down payment is a bit like chasing a moving target that you may not be able to catch up to. If you have the money available, go for it, but if you don’t it’s not the end of the world. There are low down payment loan options available to you that can make homeownership a reality sooner than you think.
Saving up for that 20% down payment is a bit like chasing a moving target that you may not be able to catch up to.