Home prices are increasing faster than incomes, especially for younger households. Add in things like the pandemic and student loan debt, and it’s hard for many to see a path to homeownership.
Many millennials are turning to the bank of mom and dad. A recent report from Apartment List found that 63 percent of millennials surveyed do not have any savings for a down payment, and more than 20 percent expect financial help from family towards a down payment.
Alternative to the bank of mom and dad
Most buyers don’t know to look for down payment assistance that could help them save on their down payment, closing costs or provide tax savings. There are programs in every market designed to help otherwise qualified buyers overcome the down payment hurdle.
It’s also true that buyers are overestimating the down payment needed. Even this Apartment List study notes the difficulty saving for 20 percent down on a median-priced home. But, 20 percent down is just a myth. In fact, the average down payment for a first-time homebuyer is only around 6 percent.
Instead, let mom and dad keep their retirement savings intact and do your research on the down payment help available in your market. There are even programs designed to help graduates with student loan debt.
An even bigger issue
Let’s also not downplay an even bigger issue. It’s primarily higher-income families who are able to support their adult children, however it’s renters from a lower-income background who are more likely to need assistance. This cycle reinforces existing wealth inequality that’s transferred from generation to generation.
Homeownership programs help address part of that issue. They give equal opportunity to eligible homebuyers, providing that leg up for buyers to get into the market and become homeowners.
Make mom and dad proud and do your homebuying homework, before going to them for help.