In 2008, the U.S. economy crashed. Most millennials, who were budding consumers at the time, witnessed the collapse of essential industries across the country, including the real estate market.
And if you’re a millennial interested in buying a home, certain myths might be holding you back.
Of course, there are very real and very frustrating barriers holding us back from homeownership. But catchy headlines about millennial habits don’t paint an accurate picture of what’s actually going on. Even worse, they can be needlessly discouraging. Here are five common myths about homeownership, and how each unfairly affects the millennial generation.
1. A Big Down Payment is Always Required
You’ve likely heard a significant down payment, 20 to 25%, is needed before even stepping foot inside a bank. But in 2018, the majority of millennials saved up a down payment of only 10 to 19%. First-time home-buyers may also be able to take advantage of FHA loans, which may only require a down payment of around 3%. If you’re ready to purchase a home, research the market in your area and what you can expect to pay. For example, say you decide to buy a house priced around $100,000, and you can afford a 10% down payment. Before getting a loan, you would need to save $10,000 — something that may be achievable in just a few years, depending on your financial situation.
This isn’t going to be the case in many housing markets, of course. But being aware of all your options — and that real estate practices have changed since the 70s — can help you create a savings plan that helps you meet your goals on your own terms.
2. Everyone Dreams of Homeownership
In America, buying a single-family home with a white picket fence is the dream, right? In reality, homeownership is not for everyone. Some millennials have priorities that come before owning a home, such as travel or paying off student debt. And some who have already made the leap regret the big decision. According to a recent survey, 81% of home-buyers aged 18 to 34 have at least one regret about their purchase — almost double the amount of self-doubting baby boomers.
If your heart is set on homeownership, the dream is still possible. Just remember to prepare for ongoing costs like structural repairs, property taxes and homeowner’s insurance. And keep in mind that just because you were approved for a certain amount for a mortgage does not mean you can afford it.
3. Millennials Don’t Want Starter Homes
After the crash, millennials may have been wary of making investments in a shaky economy. Today, homebuying is on the rise — only many millennials are skipping the starter homes and heading straight toward the finish line. Experts believe that due to millennials renting for extended periods, they’re more likely to choose a home where they can stay long-term.
The price of a starter home can vary, ranging from $150,000 to $250,000 on average. On the flip side, millennials can expect to buy a premium home for $300,000 or more. If you’re already saving thousands for a down payment, it may not feel so unreasonable to hold out for a home you’ll be comfortable in for years to come.
However, this generation has had to deal with low-wage jobs until salaries began to suddenly creep upward a few years ago. In this context, the idea that millennials are only delaying homeownership because of impractical wants is unfair. Starter homes can be a great idea, but it’s also unrealistic to believe that they’re widely available — or even affordable in today’s market.
4. Homeownership is More Expensive Than Renting
Most people who rent feel the option is cheaper than buying a home. After all, when the washer breaks or the ceiling leaks, your only job is to alert the landlord. But the living situations are too different to compare. In a single-family home you own, you often get a larger, more private space you don’t have to share with neighbors, often with a yard. Plus, building equity in a home means you can potentially earn a profit at a later date.
When trying to determine if you can afford homeownership, consider your entire financial status, including income, assets, savings, obligations and more. And don’t forget about credit card debt plus student and auto loans. Use a mortgage calculator, which computes potential property taxes and insurance rates, to determine what size loan you can afford.
The renting vs. homeownership debate just has too many factors to generalize. Ultimately, your personal finances, goals and preferences can flip the decision in either direction. Statements that make big claims about affordability can often be misleading when it comes to personal application.
5. The Housing Market Has Collapsed
Before the crash, getting a loan with a low monthly payment, such as an interest-only loan, was simple. Buyers could avoid questions about credit scores or income verification. Obstacles like no money for a down payment were resolved with a no-documentation loan. Looking back, it’s no surprise the market crumbled.
10 million people lost their homes during the crash, with a net loss of $16 trillion. But real estate has steadily been on the rise, the market rebounding more than 50% since the recession. Many people, even millennials who came of age during the crisis, want to own homes. Today, it’s possible to find a real estate agent who will listen to your needs and find a home within your budget.
The Truth Behind Millennial Myths
Is buying a home your dream? Then don’t let myths about millennials and homeownership cause fear that can hold you back. The typical down payment most hear of — a tidy sum of 20% — is often a thing of the past. And while many believe renting is cheaper than owning a home, a budget with an affordable mortgage may lead to lowered expenses and an improved living situation.
Before you begin to look at home, look at your financial situation. Get the full picture with data like income, assets, debts and more. Once you know exactly where you stand money-wise, you can create a plan to save up a down payment and buy a home.
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