Although it’s taken awhile, millennials are finally starting to make an impact in the housing market.
Projected to overtake their baby boomer parents this year as the largest generation in the United States, millennials now comprise 37 percent of first time home buyers. Toll Brothers, the largest U.S. luxury-home builder, said in August of 2017 that 23 percent of its sales were to customers with at least one buyer age 35 or younger.
U.S. News and World Report has compiled a list of best lenders of 2019. There are many types of loans available; the picture will become much more clear once your decide on the type of home you desire, and your financial situation, FICO score and proposed down payment are determined.
Taking advantage of money offered by their baby boomer parents, many millennials are able to attain home ownership through monetary gifts whether it be full cash deals or by offering 20 percent down payments, according to Nicole Rueth, a producing branch manager of Fairway Independent Mortgage Corp.
“But even if you don’t have the cash for a 20 percent down payment, we’ve have great Freddie Mac, Fannie Mae, FHA loans that only require 3-3 ½ percent down, “ said Rueth. “On top of that, many times you can get a gift from a parent or sibling or anticipated bonus money to help, or a lender credit to pay moving costs. There are many home buying programs and options.”
The Down Payment is No Longer the Dreaded Down Payment
The down payment aspect of buying a home still strikes fear in the hearts of potential home buyers. Many people are still under the impression that a 20 percent down payment is necessary and that’s just not the case anymore. Down Payment Resource, a group that helps first time home buyers get the assistance they need to purchase a home, indicates that the average down payment is 6 percent, and that payment may be augmented by many state assistance programs.
“The key is finding a lender who is familiar with all the various grant programs that are on the market,” said Rueth. “We can find incredibly creative solutions to help with the down payment.”
As an example, Community Resources and Housing Development Corporation's Neighborhood LIFT program provides eligible home buyers with $15,000 of down payment assistance on qualified properties, and provides home buyer education that will prepare them for their home search, financing and managing of the financial responsibilities that come with home ownership. This initiative includes Denver and Aurora, and the greater metropolitan area.
In 2016, the average assistance package for a down payment on Denver homes was $16,121, according to Down Payment Resource.
Affordable First Mortgages are Key to Home Ownership
The Colorado Housing and Finance Authority (CHFA) offers financial resources to help first time home buyers with down payment assistance as well as finding affordable first mortgages. These packages have enabled over 100,000 Coloradans achieve home ownership, according to CHFA. Often lenders can be found that will offer reduced closing costs and no mortgage insurance, even with a low down payment.
Take Advantage of Mortgage Credit Certification (MCC)
Usually used alongside a down payment program, the MCC helps reduce your annual taxes and is capped at $2,000 per year. Home buyers may receive this tax credit as long as they live in the house and retain the original mortgage (i.e. if you refinance, it goes away).
According to CHFA, here’s how it works:
- Pair the CHFA MCC with your CHFA first mortgage loan or any loan from a CHFA MCC-approved lender.
- Reduce the amount of federal taxes you owe by claiming 20 percent of your annual mortgage interest as a tax credit on your tax return.
- Claim the remaining interest as a home mortgage interest deduction.
- The result: You pay lower taxes and have more money to put back into your home or into savings!
Interest Rates Are Still Incredibly Low
Mortgage interest rates are still at historic lows. It’s important to take advantage of these low rates and make the American dream of owning a home a reality
The first step is setting up a meeting with a trusted lender who will determine if you will quality for a loan. Following the meeting, you may discover that you don’t have the money required for a home purchase. Your chosen career and the ability to save as a result may require you to wait a few more years. However, there is no better time than now to establish a plan and set a timeline for the purchase of your home.
“So many people think they can’t buy,” Rueth said. “I do a lot of videos covering what you need for a credit scores and minimum down payments. You can get into a house with a credit score of 600 and $3,000 down. It’s a matter of breaking through some of the myths that are still out there when it comes to buying a home.
“Bottom line, you don’t need 20 percent. There are so many opportunities out there to buy today that it doesn’t make sense to wait. Knowledge is power. You have to talk to someone who is forward thinking and creative to help you buy now or put a plan in place. Without a plan, action doesn’t take place.”
To find out if you qualify for home ownership, contact Nicole at 303-214-6393.
Want to learn more? Our Usaj Realty brokers are more than happy to help you! Please call us at 720-398-4999.
(Editor's note: This blog was originally published in October of 2017. It has been updated and edited to provide current information).