Millennials and homebuying questions – these go hand in hand. Of course, most homebuyers have a lot of questions, but this generation has a unique position where they are between those who had to put 20% down in order to buy a house, and those who do not believe they will ever have the money to buy a house.
Therein lie the questions.
I have written in the past about millennials’ school debt has created a situation where many do not have the ability to save enough in order to have a downpayment for a house. (See Millennial Mortgage Problem in Baltimore and Other Cities.)
This issue has given rise to downpayment assistance programs in Baltimore and other areas, as well as low downpayment mortgage options such as FHA mortgages or 3 or 5% down conventional loan products.
What millennials need to know – and understand – is that homeownership may be closer to within reach than imagined!
A survey run by Fannie Mae in 2014 shows that the top four reasons that millennials haven’t bought a house yet are (from a NerdWallet article):
Insufficient credit score or history
Affording the down payment or closing costs
Insufficient income for monthly payments
Too much existing debt
A company called NerdWallet looked at these reasons and wrote an article about them. They came to the determination that in many cases, not being able to buy a house as a millennial with debt is not necessarily a reality – more of a perception of the possibility of owning real estate.
1. Credit score – Though yes, most often higher credit scores can provide many homebuyers with the best loan options, that doesn’t mean that there aren’t options for those without “perfect credit.”
2. Downpayment Options – there are many, as I wrote about above! There are downpayment possibilities of as low as 0% depending on qualifications, location, and other factors. The NerdWallet article states that 30% of homebuyers put down 3% or less!
3. Income for Monthly Payments – Millennials, on average, have a debt-to-income ratio of 32% . That is within the range of 28-36% that most lenders look for when considering loan applicants.
4. Student Loan Debts – Higher education degrees sometimes come with higher student loan debt. It also comes with a positive association with homeownership. There can be income-based repayment options or sometimes student loans can be refinanced at lower rates.
If you are considering buying a Baltimore home, please contact me. I would be happy to put you in touch with one of the mortgage professionals I work with regularly to help you determine your best path to homeownership.