Cash-strapped millennials are increasingly turning to their parents for assistance in financing their first home.
A recent study found that about 65 percent of people aged 18 to 34 expect to seek financial assistance from Mom and Dad in the purchase of their first home. What’s even more interesting is that a significant portion of these young home-buyers are not settling for starter homes, but are instead opting for larger homes they will “grow into.”
Tyler Hixson, Industry Strategy Lead at OpenDoor, a real estate company, told “CBS 5 This Morning” of Phoenix that parents and grandparents helped provide funds to the buyer in more than a quarter of first-time home purchases among millennials.
Between October 2017 and September 2018, more than 26 percent of mortgage borrowers who used Federal Housing Administration-insured loans received assistance from a family member to make their down payment, up from about 22 percent in 2011. FHA loans already come with much lower down payments; while conventional mortgages can require down payments as high as 20 percent, FHA buyers can pay as little as 3.5 percent.
Still, many first-time buyers are struggling to enter the housing market on their own.
Lauren Maxwell, executive vice president at mortgage lender CrossCountry Mortgage Inc. told the Wall Street Journal that about half of her clients who take out FHA loans for first-time purchases get help from family.
As the economy starts to pick up for millennials, they continue to be burdened with student debt and minimal wage growth compared to previous generations. Homeownership among those under 35 dropped 8 percentage points between 2004 and 2017.
Millennials are hoping to break the cycle of paying rent to a landlord by buying before the housing market gets even more expensive — and they are getting creative about it. Some buyers are even resorting to crowdfunding campaigns to raise money from family and friends.
Young people should feel no shame in asking their parents or grandparents for assistance in this major investment — assuming they can afford the monthly mortgage payments afterward. This will likely be the most important investment of their life, and if they don’t act soon, they could get outpriced for good.
Brendan Pringle (@BrendanPringle) is writer from California. He is a National Journalism Center graduate and formerly served as a development officer for Young America’s Foundation at the Reagan Ranch.
