Officially considered a term that identifies individuals born between 1981 and 1997, millennials account for a large part of today's demographics. However, what many don't know is that they also represent a substantial amount of spending power and influence amid their local communities, be they in East Nashville or elsewhere. Perhaps this is why many millennial home buying myths such as the following still linger.
Myth #1: Millennials Prefer Renting Over Buying
For the fourth year in a row this age group are the top home buyers, with 34 percent of millennials currently owning homes. Some studies estimate that 90 percent of non-owning millennials surveyed expressed interest in buying a home in the future. Essentially, even this younger generation has realized the value of homeownership, so it's wise not to underestimate the ability and interest of millennials concerning settling into a home.
Myth #2: Most Millennial Home Buyers Can't Cover the Down Payment
With diligence and research, most millennials can cover a down payment. While this could be considered a fact for many millennials, (and other buyers across the spectrum), if one is talking about the standard 20 percent down payment concept. However, there are Federal Housing Administration grants and other options that can have first time buyers paying anywhere from zero dollars to a 5 percent down payment. Other low down payment programs are available through the Federal National Mortgage Association (formerly Fannie Mae) and through the Federal Home Loan Mortgage Corporation (formerly Freddie Mac). Millennials may also qualify for special loan programs such as veterans benefits, and some may opt to have parents co-sign for their first home to get better mortgage rates overall.
Myth #3: Millennials Have Too Much Student Debt to Buy a Home
Indeed, those with heavy student debts may not qualify for a home until paying down those loans, but this isn't true for most millennials. In fact, amid buyers age 36 and younger with student loans, almost half of them have loan balances averaging $25,000. Today, some lenders such as the FNMA are calculating debt-to-income ratio differently than before, which benefits student loan holders tremendously. Rather than factoring in monthly student loan payments as one percent of the entire loan, lenders can use the actual monthly payment amount for that calculation. This lower amount can make the difference between loan approval and denial.
Myth #4: Millennials Don't Fully Understand Finances
Quite a few people mistakenly believe that millennials somehow never got around to learning about finances such as:
However, the fact that this group is one of the top buyers today seems to indicate that millennials are not only financially savvy, but they also understand the process and appreciate the vast benefits of homeownership. Furthermore, to show just how wise they are when it comes to money matters, millennials tend to not buy more home than they can afford which helps keep their mortgages affordable. It also seems that this demographic knows how to use a conservative approach to strike a good deal and negotiate bargains with even the toughest sellers and lenders.
Home Buying Habits Of Millennial First Time Home Buyers
Millennial buyers are savvy buyers. Perhaps one of the reasons Millennials have a negative reputation in the real estate industry is because they tend to go against the grain of previous generations. However, this often results in smart, beneficial outcomes for the younger generation:
- Wait Longer. Buying a home isn't a top priority after graduating high school. Higher education and a solid financial footing come first--and this is a good thing!
- Recession Mindset. Coming of age during the Great Recession has left its mark. Millennials aren't confident with projections; instead, they jump into home ownership when they are optimistic--not "experts."
- Different Needs. This generation is frugal, and tend to start families later than previous generations. Affordability is more important than huge layouts, and urban convenience is more exciting than large yards.
- Necessity, not Symbols. Boomers and Gen Xers tend to view home ownership as a status symbol and a family anchor. Millennials will buy when the financials work in their favor and are more willing to relocate than previous generations so they tend to be less emotionally bonded to their homes.
Finding the ideal home with the right financial terms can be challenging, which is why it makes good sense to reach out to a local real estate professional for more information concerning the home buying experience.
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