45% of millennials are too financially strapped to afford down payment and closing costs
More than half of Americans admitted they do not know the minimum required down payment needed to purchase a home.
The findings of Bankrate’s new research revealed that 51% of Americans have no clue when it comes to a home’s down payment. Twenty-eight percent guessed that the standard recommended amount of 20% or more of the purchase price is needed. Meanwhile, 2% calculated that the minimum requirement is between 0% to 5% of the price, depending on the loan program.
Generally, the respondents’ perceptions indicated that consumers were not entirely aware of the various affordable loan programs, according to Bankrate.
Deborah Kearns, a mortgage analyst at Bankrate, said that 20% of the purchase price is the recommended amount.
“However, many homebuyers don’t realize that conventional loans require just 3% of the purchase price as a down payment and some VA and USDA loans don’t require anything at all,” Kearns said. “Local first-time homebuyer assistance programs can also lower your upfront, out-of-pocket costs substantially at closing.”
Not knowing was only a fraction of the problem. Bankrate also reported that almost half of prospective millennial homebuyers said their cost of living was one of their biggest barriers to buying a home.
Compared to 38% of Gen-Xers and 31% of baby boomers, 45% of prospective millennial buyers could not afford a down payment and closing costs for a home due to the burden of the everyday cost of living.
That is why home older generations were typically faster to save up for a down payment on their first home. Of those who were able to save in under 10 years, baby boomers needed an estimated average of two years and six months, while Gen-Xers took three months longer and millennials four months more.
However, 22% of millennials feared they won’t be able to save enough for a down payment, with 37% of Gen-Xers and 60% of baby boomers feeling the same way.
