TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/343616
Th e M Rep o RT | 51 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ANALYTICS the latest Half of millennial Buyers Plan to seek Help from Parents Down payments and mortgage insurance makes it difficult for Millennials to buy homes, but Mom and Dad are chipping in. s urvey results released early this month show that half of Millennials plan to seek help from family members to gather down payment funds for a home. According to a consumer survey conducted by Trulia, 60 percent of American adults aged 18–34 say that poor credit, a lack of savings, and severe debt stands between them and homeownership. As a result, 50 percent would have to ask for help from their parents or grandparents to put together enough money to make a down payment. "Saving up for a down pay- ment is a big obstacle, and it can make the home-buying process even more intimidating," said Michael Corbett, a real estate expert at Trulia. For those having to turn to the "Bank of Mom and Dad," Corbett says all parties involved should treat the matter like a bank loan—complete with a written contract and negotiated monthly payments—in order to avoid "woes among family members." In other strategies, 37 percent of Millennials surveyed said they plan to take on a second job in order to save up, and 22 percent intend to use a state or federal gov- ernment program for assistance. Meanwhile, as prices rise, nearly seven in 10 respondents said they've narrowed their shopping to homes priced under $200,000. However, nearly half don't know how much money they would even need for a down payment, and out of those that do, two in five say they would put down less than 10 percent—a choice Corbett warns against. "The goal should be a 20-per- cent down payment," he said. "It gives you some equity from the start, gets you a lower inter- est rate, reduces your monthly mortgage payment, and lets you avoid [private mortgage insur- ance] monthly fees." In another study released by TD Bank in late May, 65 percent of homebuyers in the last decade said mortgage insurance premiums brought their monthly expenses up higher than expected, with 30 percent of Millennials admitting the higher cost of insurance has forced them to delay their house purchase or seek a smaller home. The study also found that, despite the state of their finances, many Millennials would be unwilling to part with what the company calls "life's little luxuries." According to Trulia's findings, the top item young adults today say they could never give up is their car (65 percent), followed by their smartphone (45 percent). Also making the list of "must- have" expenses are cable and Netflix subscriptions, with 20 percent and 15 percent unwilling to sacrifice their subscriptions, respectively.