Millennial homeowners often struggle with mortgage requirements!
More than half of millennials currently own homes, but the generation as a whole continues to struggle to put money down and keep up with monthly mortgage payments.
That’s according to a new survey from finance website LendEDU, which recently undertook a two-part study on millennials and mortgages. Fifty-eight percent of respondents to the online survey — which polled 1,000 people between the ages of 23 and 38 — currently own a home, with 83% of those respondents using a mortgage to finance its purchase.
Three-quarters of these buyers made their purchase with a Federal Housing Administration (FHA) loan, affirming that the program remains a favorite for young and first-time homebuyers alike.
“I’ve used FHA-insured loans for both of my mortgages,” said Michelle Clardie, a millennial real estate blogger who was quoted in LendEDU’s study. “The 3.5% downpayment option available through FHA loans was the only way I could afford a down payment in the high-value Los Angeles and San Diego real estate markets.”
Even more millennial homebuyers would have likely used an FHA loan if they had known about the program, LendEDU reported. Of the 25% that didn’t use an FHA-backed mortgage, 45% stated that they weren’t aware of the program before purchasing their home.
The average downpayment for respondents who bought homes with a mortgage was 16% of the total purchase price. Unsurprisingly, 52% are paying private mortgage insurance, which is often required if the downpayment is less than 20%. It’s an additional recurring cost that apparently leaves little wiggle room for paying down the principal. Only 39% of respondents said they feel secure about meeting their monthly loan payments.
Among additional strains for these homeowners, 18% of respondents indicated they have “overwhelming credit card debt” or another form of debt, while 33% said their savings are “limited” and an emergency expense would “drain them." Another 10% said their job security or line of work is unstable.
Thirty-five percent of millennials with mortgages indicated they regret financing their home with a mortgage, with 13% saying the cost is hurting their bank account and 17% specifying they should have waited longer to purchase a home. Five percent said their regrets were for another reason. And many reported their mortgage is forcing them to delay other life goals, including marriage (17%), having children (16%), getting a pet (7%) or changing jobs (15%).
“It seems that a good proportion of this generation is taking the plunge into homeownership without really being ready to meet the demands,” LendEDU reported.
Still, that leaves a majority of millennial homeowners who are generally happy with their home loan. Forty-eight percent said they received a good deal on their mortgage and that they considered it “a wise investment.” Another 12% said they wanted to become a homeowner “at whatever cost,” while another 3% said they did not regret taking out their mortgage for another reason.
It’s also worth noting that, despite the rise of nonbank lending, 73% of respondents to LendEDU’s survey went through a traditional bank for their mortgage. And only 20% said they handled the entire process online, from application to closing, compared to 38% who said the entire process was handled in person. Forty-two percent of respondents used a combination of online and in-person channels. Scotsman Guide