Studies show the majority of millennials would like to purchase a home, but many don’t think they’re able. These 4 keys to home ownership for millennials are unknown to many would-be first time home buyers but could be the difference between throwing money away on rent, and owning a piece of the American Dream.
- Credit Score- Many millennials simply don’t know what the credit score required to purchase a home is. 620 is the minimum required credit score to obtain a loan. Two-thirds of millennials either meet or exceed that marker.
- Debt-To-Income Ratio – Many millennials think they would never be able to purchase a home because of student loan debt, and while that may be the case in some scenarios, it couldn’t be further from the truth. In 2013, only 8% of households repaying student loans had high debt burdens — defined by the Consumer Financial Protection Bureau as over 14% of monthly income toward debt. According to an analysis by New America, a nonpartisan policy institute, bachelor’s degree graduates with debt pay an average of $312 a month in student loans. Considering the estimated monthly income of $2,940 for a 25- to 34-year-old millennial, this is a student debt threshold of 11%, which is a medium debt burden, according to the CFPB. 43% is the overall debt-to-income ratio that is required by most lenders.
- Affordability of owning – With the average rent in Nashville being $1,050 (and climbing), owning can be much cheaper for many people. A good mortgage calculator can be a great online resource to begin figuring out how much your monthly payments for your mortgage would be. According to Fannie Mae, 93% of millennials that want to purchase a home say that the main reason they would like to purchase is for privacy and security. Sometime, even if it a few dollars more than renting, it makes more sense to purchase so that you can have privacy and security.
- Down Payment assistance- This is HUGE.
- There are FHA loans that require no down payment.
- Many lenders are beginning to offer conventional loans that require only 3% down.
- There are many other governmental assistance programs and private programs that offer down payment assistance.
With 49% of millennials wanting their next move to be the purchase of a home, there’s a good chance that if you’re reading this you’re considering purchasing. Give me a call if you have any questions or to begin your home search.