Homeownership may be somewhat more elusive to millennials than members of previous generations. Delayed marriage and the crushing weight of debt has made the dangling carrot of homeownership a bit more difficult to attain.
But millennials aren’t resigning themselves to a lifetime of renting. Rather, they’re chasing the dream of homeownership with intention and devotion -- and it’s paying off. Millennials are now the largest generation in the housing market.
According to new research from TD Bank, nearly two-thirds of the generation are being conservative with their cash in order to come up with the money for a down payment (which, for 74% of millennials, is still the biggest hurdle to owning a home).
In addition to cash savings, low-down payment mortgage programs and well laid-out priorities are opening doors for the 63% of millennials who plan to purchase their first home in the next two years.
From dream to reality
Millennials are getting their financial ducks in a row in an effort to achieve the American dream of homeownership. Their top three priorities: saving for a down payment, paying off debt, and having a steady job.
Once these goals are accomplished, 65% say they will have a partner or spouse as a co-signer. Additionally, 33% say they would like to pay off their mortgages sooner rather than later. One-third (33%) are planning on paying off their loan over a 15-year period.
"It's encouraging to see millennials thoughtfully prepare to enter the housing market," Scott Haymore, Head of Pricing and Secondary Markets at TD Bank, said in a statement. “With today's affordability programs, owning a home doesn't have to be a dream, it can be a reality."
But while the dream of homeownership may be crystallizing, the reality of what happens once you’re a homeowner may not be as clear to millennials.
Saving for repairs
Repairs and unexpected costs crop up regularly for homeowners, but many millennials aren’t budgeting for these expenses. Haymore says this could be why many millennials have difficulty coming up with a realistic monthly mortgage payment.
"The costs of running a household can be a shock to new home owners," Haymore said. "Monthly expenses for utilities, homeowner's association fees, cable and internet, can add up quickly.”
Nearly half of millennials racked up close to $5,000 in unexpected costs during the mortgage process, according to TD’s survey. But careful budgeting can help mitigate the risk of facing savings-annihilating expenses.
Haymore recommends factoring in the cost of utilities, HOA fees and other expenses at the very beginning of the mortgage process. Doing so can give borrowers a clearer picture of their overall budget and help them determine a realistic monthly mortgage payment.