May 1st, 2019
Over the years, first-time home buyers have found many creative ways to get the money for their down payments. However, it seems that today’s Millennials home buyers are resorting to the “old fashioned” way: saving up paycheck by paycheck, according to a recent survey conducted by Redfin. In fact, 72% of Millennial home buyers responded to the survey saying they’re setting aside money from each paycheck to put toward their future down payment. The reason? It’s not completely clear, but one driving factor could be that the generation’s income levels are rising (average hourly earnings have risen 3.2% over the past year).
The chart above is an updated representation of the various ways Millennials save for down payments, and the red shifts are encouraging to see. However, as we always have to keep in mind, just because Millennials home buyers are able to save more from their paychecks, it doesn’t mean they can automatically afford more. It’s the loan officer’s job to look at their entire financial picture and make sure that after paying the down payment, they still have plenty of money in reserves for emergencies, home improvements, furnishings, retirement, etc. Explore the different alternatives for them, encourage them to create a budget, and give them options based on what they can afford in both the short-term and the long-term.