4 Millennial Home Buying Myths, Debunked

4 Millennial Home Buying Myths, Debunked


Buying a home right out of college or in your 20's isn't as common as it used to be. Millennials, which are those born between 1981 and 1997 are renting longer, living with their parents, and drowned in student debt. 

Research done by nerd wallet showed that despite this perception, millennials do in fact favor buying a home. And the reason they’re not acting as fast as previous generations is because of their perceived difficulties of affording the home. 

Here are some facts on millennial home buying I found interesting from their research:

  • U.S. millennials total 66 million individuals and 24 million independent households
  • The median age for first-time homebuyers has remained virtually unchanged for the past 40 years: In 2015 it was 31 years old, compared with 30.6 in 1970-74
  • Two-thirds of millennials haven’t reached that homebuying age of 31, and 22% are under 25 years old
  • Millennials are renting for a median of six years before buying, compared with a median of five years for renters in 1980
  • Millennials are expected to form 20 million new households by 2025
  • The median income for a millennial older than 25 is $38,220 
  • First-time homeowners make up 32% of all buyers — compared with a historical average of 40%.
  • A majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons.

So...why aren’t more millennials pulling the trigger on buying a home?

Their perception that they can’t afford to own.

Here are four perceptions and realities of home buying for millennials: 

1. I can't buy because of my lack of credit history or bad credit score.

The reality is... 

  • The Credit standards for loans are slowly lowering after peaking during the recession. With a decrease in 2015 and data from Zillow, credit scores for a first time home buyer has dropped since the high in 2010. 
  • Loans like the FHA , a government agency that insures home loans close at lower scores than standard loans.
  • Have a conversation with a mortgage lender and see what's possible for your unique situation. 

2. I can’t afford the down payment or closing costs when buying a home.

The reality is... 

3. I don't have enough money to afford a mortgage.

The reality is...

  • Millennials living in most places in the U.S. can afford the monthly mortgage payments of the median starter home. 
  • If you have an estimated income of $3,000 and median estimated payments of $945, your debt to income ratio would be on par. 
  • The ratio is within 28% to 36%, where most lenders look for when considering mortgage applications.

4. I have too much debt in student loans to get a mortgage.

The reality is...

  • According to the research, higher education has a positive effect on homeownership.
  • Homeownership increased for each level of education, even as student debt went up.
  • According to TransUnion, there’s only a 3% difference in the mortgage participation rate between those with student loans and those without.

Each persons situation is unique. Your best bet is to talk to a mortgage lender to determine what your best bet is. Best case, you'll surprise yourself with reasonable options. Worst case, you'll have goals set out for yourself. If you have questions about the pre qualification process, please feel free to reach out and I can help answer your questions, or point you in the right direction. 

Austin Schneider | austin.schneider@rsir.com | Realogics Sotheby's International Realty

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