MILLENNIALS
ON THE MOVE

For some time, experts doubted whether millennials (ages 18-36) valued homeownership as part of the “American Dream.” However, new studies show that milliennials are dominating the first-time homebuyer catagory.

According to Realtor.com, Millennials are surpassing Generation X as the group responsible for the most new mortgages. This means that Millennials’ share of the mortgage market continues to rise. By the end of 2018, Millennials represented 45% of all new mortgages, compared to 36% for Generation X, and 17% for Baby Boomers. What’s more is Millennials also overtook Gen X by having the largest share of new loans by dollar volume at 42%!

MILLENNIAL PURCHASE POWER IS HEATING UP

Realtor.com’s Director of Economic Research Javier Vivas said Millennials are getting older, with better jobs and deeper pockets, allowing them to expand their collective purchase power, and hence, their footprint in the market. “The stereotype that Millennials primarily choose to buy homes and live in large metro areas isn’t the reality,” Vivas said. “Results show Millennials’ expansion is more heavily conditioned by affordability than in prior years, so their eyes are set on less traditional secondary markets where homes and jobs are now available and plentiful.”

According to the company, affordability is such a huge factor for Millennial homebuyers that many are moving to housing markets that previous generations considered less desirable.

During 2019, Millennials have moved to affordable areas with strong job markets where they have more buying power. At the end of 2018, the median price of a mortgaged home purchased by Millennials was $238,000, $26,000 LESS than the median price of a home mortgaged by Baby Boomers and $51,000 LESS than Generation X.

Realtor.com notes in addition to increasing their buying power and taking on larger mortgages, data reveals Millennials have consistently made lower down payments than other generation since 2015. In fact, Millennial down payments averaged only 8.8% in December 2018, compared to 11.9% for Generation X and 17.7% for Baby Boomers.

Benefits of HomeOwnership…

EQUITY

Your monthly mortgage payment is a form of “forced savings” building your net worth with each & every payment. It’s estimated that a homeowner making a $998 monthly mortgage payment (P&I) on a $200,000 home can accrue an estimated $3,021 in equity in year one, $3,436 in year two, growing year after year. In just 5 years, a homeowner will have accrued over $25,000 in earned equity & property appreciation!

PREDICTIBLE COSTS

Currently, the median rental rate sits at $1014 per month, with 100% going to a landlord. You likely handed over a heafty deposit, and when your rental agreement is up, you could see your monthly rental rate increase, too. With a mortgage, your monthly costs are predictable and more stable than renting because they’re ideally based on a fixed-rate mortgage, letting you take control of your mothly expenses.

SOCIAL BENEFITS

While there are many financial benefits to homeownership, there are notable social benefits as well. Homeowners move far less frequently than renters, bringing stability to neighborhoods & communities. This strengthens social ties among neighbors, who then work together to promote a safe & orderly environment in their area. Better educational outcomes are linked to homeownership. Homeowners have a financial interest in ensuring that their unit is well-maintained and repaired.  Landlords charge rents based on the expected level of “use” that will be caused by their tenants, whereas, homeowners have a financial interest in ensuring their property is cared for and well-maintained. Studies also show the decision to stay in school by teenagers is higher for those raised in home-owning parents. Homeowners report higher self-esteem & happiness than renters. They are more likely to believe that they can do things as well, and they report higher self-ratings on their physical health.

Are you ready for homeownership?

Owning a home embodies the promise of individual autonomy and is the aspiration of most American households. Homeownership allows households to accumulate wealth and social status, and is the basis for a number of positive social, economic, family and civic outcomes.

Your dream of owning a home is a greater possibility now than at almost any other time in American history. Before you renew your rental contract, meet with a local REALTOR® and find out if homeownership is possible in your near future. Owning a home embodies the promise of individual autonomy and is the aspiration of most American households. Homeownership allows households to accumulate wealth and social status, and is the basis for a number of positive social, economic, family and civic outcomes.

 

READY FOR A MORTGAGE? What NOT to do…

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DO NOT TAKE OUT MORE LOANS! Taking out new loans before applying for a mortgage (think new car, boat, etc.) increases your debt load and a lender may question your financial responsibility. Lenders will consider the amount of debt you have, and compare those debts to your gross monthly income. If you are financially overextended, you might not be dependable to make monthly mortgage payments. If you are viewed as a high risk, you may qualify for a lower loan amount or higher interest rate.
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DO NOT APPLY FOR NEW CREDIT CARDS OR RACK UP CREDIT CARD DEBT! Credit card balances are also considered as a monthly recurring expense, and a new credit account will increase your DTI (debt-to-income) ratio. Carrying too much credit card debt is one of the most common reasons for mortgage rejection. It makes you a risk in the lenders eyes, and it will affect your credit score. If you have existing credit accounts that are not being used, keep them open. Limit use of credit cards before applying for a mortgage loan.
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DO NOT SPEND YOUR SAVINGS! Lenders will want to verify that you have the funds to cover the costs of closing on a home, as well as the ability to repay back the loan. Your savings is something that lenders will verify, and not only do they want to see liquid assets, they want to see history of maintaining it. Save as much money as possible prior to obtaining a mortgage. Avoid large purchases that deplete your savings. A beach vacation might be tempting, or that new flat-screen TV you’ve wanted before the big game. But these things chip away at your much needed cash reserves.
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DO NOT MAKE LATE PAYMENTS! Lenders use your credit score as a risk-assessment tool. A higher score indicates a lower risk for the borrower. And the reverse is true — a lower score indicates a higher risk for the lender. Do everything possible to protect your credit score when shopping for a mortgage loan. Your payment history accounts for 35% of your overall score, more than any other single factor. One late payment can drop your score by 50 points or more, depending on the circumstances. That’s the last thing you need before applying for a mortgage.
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DO NOT MAKE MAJOR LIFE CHANGES! Lenders want to see a hisotry of steady employment and income. In most cases, they’ll require steady employment for at least two years. Employment is a key qualification item during the mortgage application process. If you change jobs within the same field, and secure an equal or greater level of income, you’re likely not to have problems. But if you make a major career change, or it your income decreases from your previous positions, you could hit some snags during the underwriting process. Bottom line… maintain the status quo.