Millennials are finally ready to enter the housing market, but they’re having trouble amassing the down payments necessary to make the leap.
More than two-thirds of potential millennial homebuyers say that saving for a down payment is the biggest barrier to purchasing a home, and a fifth of them said that they’ll get financial help from friends or family members to make the purchase, according the new research by TD Bank. Student loan debt, high rents and low wages all make it tough for millennials to save enough to cover the standard 20 percent down payment.
A third of all buyers plan to put down less than 20 percent on their home purchase, a percentage that rises to 38 percent among millennials. More than three-quarters of those surveyed said that mortgage rates were the most important factor when purchasing a home, and 37 percent of first-time buyers said that they’d take advantage of mortgage affordability programs.
Such programs allow buyers to get a home for as little as a 3 percent down payment, but many financial advisors advise having a bit more “skin in the game” to offer protection against any future home price declines. Mortgages that have less than a 20 percent down payment usually require private mortgage insurance, which can make loans more expensive.
One thing that millennial buyers have going for them is that interest rates have remained historically low. Mortgage rates are currently around 3.4 percent, and they’re expected to remain below 4 percent through the end of this year, according to the Mortgage Bankers Association.