Much attention has been given to millennials’ home buying habits. In fact, an Urban Institute study last year found that millennials are buying houses later and at lower rates than previous generations. Now, a new survey by home furnishing retailer Northshore Fireplace provides some insight into why.
Coming up with the funds for a down payment is by far the biggest obstacle facing would-be millennial homebuyers, according to the survey respondents, who ranged in age from 22 to 37. Of those surveyed who did not yet own a home, roughly 65% said they couldn’t afford the down payment.
That’s not surprising considering the fact that half of those surveyed have only $2,000 or less currently saved. Even if you take advantage of a Federal Housing Administration loan (requiring only 3.5% down), a $200,000 house would need a $7,000 down payment.
At the same time, 33% of the millennials surveyed had already purchased their first home, and many of them also found saving up for the down payment to be challenging. Fourteen percent said their parents helped them come up with the money they needed, and 20% said they benefited from a combination of help from their parents and loans to fund their down payment. Approximately 53% of those with a house were able to tap into their personal savings for the down payment.
Many survey respondents blamed debt for keeping them from buying a house. More than 40% said student loan debt was their biggest obstacle, and more than 30% pointed to credit card debt. Naturally, the more debt you have, the less money you have available to put toward buying a home.
Though homeownership is often billed as part of the American Dream, not all millennials delay it for financial reasons. Approximately 20% said they were waiting to get married before buying a house. Another 10% said they didn’t want to buy a house at all, and 40% of those who don’t have enough for a down payment said they’d prefer to rent even if they did have money for a down payment.
Fear can also play a role in keeping someone from moving forward toward a goal, and millennials do have fears about homeownership, the survey found.
- 41% worry about the burden of paying a mortgage
- 35% cite the costs of unforeseen maintenance issues
- 17% are concerned about being stuck in one location
- 7% worry about the regular upkeep of the house
There’s no doubt that saving for a down payment can seem overwhelming, particularly when you have other financial goals or you’re paying down debt. However, if you do want to buy a house, there are many federal and state programs for first-time homebuyers that provide funds for both a down payment and closing costs. With a little help and some saving and economizing, you can realize your homeowning dreams.