Did you know that one in four Americans 35 years old or younger believe they need to have a perfect credit score to be considered for a mortgage?
With the FICO credit score model that ranges from a low of 300 to a high of 850, however, one needs onlyto be mid-range in most cases, depending on the lender and type of loan they seek. This is among the many myths millennials maintain according to an article by Vincent Salandro in BuilderOnline.“More than the generations before them, today’s young consumers struggle to achieve the American dream of homeownership,” says Salandro. “Escalating home prices, stagnant wages, and modestly increasing mortgage rates are contributing to a decline in housing affordability that is expected to continue this year.” Salandro maintains that many first-time buyers avoid looking for a new home because they are confused or overwhelmed by the process, especially when it comesto down payments and financing.
He cites recent studies that show that these crucialelements of the home-buying equation are laden with misconceptions and outright myths, starting with the amount of the down payment requirements. “According to the Urban Institute, nearly 65% of renters 40 years old or younger believe they need to put down 15% in order to buy a home, even though the national median down payment for first-time buyers is 5% to 7%,” he says. “As many as 19 million Americans aged 40 or younger have credit profiles and income that are strong enough to qualify for a mortgage but choose to rent instead, according to the Urban Institute,” says Salandro.Salandro speaks of another issue facing first-timers that stymy their dreams of homeownership. “While many young Americans have false notions about what it takes to buy a home, one distressing fact about this demographic can’t be denied: Many of them haven’t saved a penny toward a new home.” Today’s first-time buyers are more than twice as likely to receive help from family and friends than repeat buyers, and among first-time buyers, gifts accounted for nearly one-quarter of total down payment costs, according to experts. In addition, many millennials have prioritized education while delaying marrying and having children, key triggers associated with home buying.National Association of Homebuilders (NAHB) chief economist Robert Dietz has some good news, however.
He says new-construction is on the upswing for many first-time home buyers. He reports townhouse construction has increased 24% in the past four quarters compared with the previous four, which could offer more opportunities for first-time buyers to purchase a new home.“Despite declining affordability in many markets and down payment misconceptions, the national homeownership rate for those younger than 35 years old reached 38.6%in the third quarter of 2018, the highest level since 2013,” says Salandro.
Call or text us [626-825-9955] and we will put you in touch with a loan officer who can explain what all this can mean to your buying plans.
Source: BuilderOnline, NAHB, NAR, TBWS