New research from TD Bank reveals that millennials are more conservative with their money than their youth would suggest. In fact, nearly two-thirds are saving cash in order to buy their first home.
Nearly three-quarters of millennials (74 percent) say that saving for a down payment still represents the most significant hurdle to achieving the American dream, according to TD Bank’s second annual First-Time Home Buyer Pulse, which polled more than 1,000 Americans looking to purchase a first home within the next five years.
“It’s encouraging to see millennials thoughtfully prepare to enter the housing market,” said Scott Haymore, Head of Pricing and Secondary Markets at TD Bank. “With today’s affordability programs, owning a home doesn’t have to be a dream, it can be a reality.”
Millennials have their Home Buying Priorities Straight
- The top three priorities for millennials before purchasing a home include saving for a down payment, paying off debt and having a steady job
- One-fifth of millennials (19 percent) plan to supplement their savings for a home with financial assistance from friends and family, and 65 percent plan to have a spouse or partner as a co-signer
- Millennials want to pay off their mortgages quickly, with one-third (33 percent) planning to pay off their loan over a 15-year period
- Move-in ready homes continue to be the most popular choice for busy millennial home buyers (78 percent)
- The top three features millennials seek in a home include attractive design, a nice backyard or pool and proximity to schools or childcare
Low Mortgages Rates Triumph over Monthly Budgets
- Among all respondents polled, 77 percent cited mortgage rates as the most important factor when purchasing a home
- Seventeen percent of first-time buyers have not set aside money for unexpected repairs and costs, which is probably why nearly half (44 percent) of millennials incurred up to $5,000 in unexpected costs during the mortgage process (according to TD’s recent Mortgage Service Index Survey).
“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. Factoring these in at the beginning of the mortgage process can help borrowers assess their overall budget and determine a realistic monthly mortgage payment.”
Clearing the Down Payment Hurdle
- Sixty-five percent of all consumers indicated that saving for a down payment is delaying their first home purchase
- More Americans (one-third) are putting less than 20 percent down on a home; the percent was even higher among millennials (35 percent)
- Thirty-seven percent of first-time buyers will take advantage of mortgage affordability programs
“For many consumers, a 20 percent down payment is a major barrier to homeownership,” Haymore said. “It’s often difficult to save this much cash, especially for young adults saddled with substantial student loan debt. First-time buyers are shopping for low-down payment mortgage programs, which allow buyers to put as little as 3 percent down.”
Additional highlights from TD Bank’s second annual First-Time Homebuyer Pulse are available at https://mediaroom.tdbank.com/homebuyerpulse2016.