Security, shelter, a big responsibility, a wise investment — whatever owning a home might mean to you, there’s no question that buying a house is a big financial decision. And according to a survey by Mr. Cooper, people do still want to buy homes… but things like sticker shock, a record-breaking amount of debt, and a lack of a financial safety net or substantial savings seem to be standing in the way.
Plenty of theories exist when it comes to barriers to entry for homeownership: income growth is weak, there’s more debt to go around, homes and the fees related to buying one are expensive, or Millennials are spending too much on avocado toast. For a variety of real reasons, young people especially are finding it more and more difficult to buy a house. According to our survey, here’s why:
- 58% of aspiring homeowners lack the funds for a down payment
- 43% don’t have a financial plan in place that includes buying a home
- 37% think their credit score might need some work before they can buy
- 47% felt that they could ask their parents for help they’d need with a down payment (and 19% of respondents who are parents said they’d gift their child the money, while 11% would loan it)
Collective priorities seem to be shifting, too. People are generally getting married and having kids at a later age, living with roommates or at home with parents for longer than they used to, and facing more pressing financial obligations like student loans and high-interest credit card debt. We are also doing more and more online; 74% of our survey respondents haven’t set foot in a bank to talk with a teller within the last month, and 62% of aspiring homeowners would rather find their first house online or via smartphone app.
So how can aspiring homeowners actualize their dream when it seems nearly impossible? Besides starting with (and sticking to) a budget and improving your credit score, it’s important to recognize the true benefits of homeownership. They can be well worth the upfront cost.
- When you buy a home, you’ll start building equity —the portion of your home’s current value that you actually possess free and clear (i.e. not including your mortgage). If your house were to increase in value along with the housing market, selling it could help fund your next home.
- Stability. Buying a home means that you are not going to be spending money on rent that you can’t recuperate, and also that you’re rooted in a neighborhood and a community.
- Financial Flexibility. Once you build up substantial equity in your home — that is, after you’ve owned it and made mortgage payments for a while — you could potentially leverage that equity to cover certain expenses, pay off high-interest debt, and ease other unanticipated financial stress.
All in all, everyone is different — and for some, avocado toast might always be more of a priority than buying a house (though we think you can have both). When you’re ready to embark on your own journey to homeownership, get in touch with Mr. Cooper and talk to a pro who can help you learn more about your options.