Millennials

Many millennials are nearing a time in their lives where homeownership is becoming attractive. They are graduating from college, entering the workforce, and starting families. But millennials today face challenges that their parents’ generation didn’t. Among these are staggering student loan debt, skyrocketing healthcare costs, and overall expensive costs of living. Today’s “middle-class” home actually costs an average of three times as much as the same home would’ve cost a few decades ago. Also, despite the shrinking national unemployment rate, millennials’ wages are falling short of what their parents were earning at the same age. This puts a burden on hopeful millennials who want to give their families the American dream; they have to work harder than ever to achieve their goals of homeownership.

The housing market has experienced ups and downs over the previous decades. Today, it has finally recovered and home sales are on the rise. Not only are existing homes staying on the market for less time, but new construction sales have steadily increased over the previous few years. This positive turn for housing is due, in part, to the influx of affordable mortgages on the market. Government programs such as the Federal Housing Administration, U.S. Department of Agriculture, and U.S. Department of Veterans Affairs now insure low-cost mortgage programs that allow eligible buyers to put as little as 3.5% down on a new home purchase.

Millennials stand to benefit greatly from the available low-cost mortgages. Since the programs are government-insured, lenders are able to accept “riskier” buyer scenarios and approve applicants that would otherwise be ineligible. Such risks include low or limited credit, lacking reserves, and moderate earnings. Although buyers from all scenarios are drawn to these programs, millennials who are likely first-time homebuyers can definitely take advantage of these lenient terms.

A common struggle for millennials is being able to establish a substantial savings. Since many entering the workforce are saddled with student loan debt, earnings that would otherwise go to savings are instead allocated for this additional debt. Even those without student loan debt find it hard to save with the rising cost of healthcare, fuel, and basic household goods. Because of this, many millennials are discouraged from buying a home because they don’t have the funds necessary to make a down payment. Fortunately, this isn’t a disqualification. USDA, VA, and FHA are affordable mortgages that, in some cases, allow a buyer to purchase a home with absolutely no money out-of-pocket.

The USDA’s Rural Development loan is a zero-down mortgage available to buyers in rural areas of the U.S. who meet income guidelines. The Rural Development loan was created in the 1930s when national home ownership was at less than 25% due to high-cost and unachievable-termed mortgages. The Rural Development loan stood to make homeownership affordable and available for those Americans who were struggling to recover from the Great Depression. Similarly, today the Rural Development loan still stands to make homeownership affordable for Americans in need. The zero-down loan is reserved for buyers whose income doesn’t exceed the maximum amount in their area, as decided by USDA. But many buyers, especially the millennials who are earning less than their parents were at their age, find their incomes still qualify for the loan. The income guidelines are based on the per capita income in a given region. The number of people in a household also increases the maximum allowable income, so blended households and families with children have an even greater chance of qualifying.

Like USDA’s loan, the VA’s loan requires zero down payment. However, it is only available to approved active duty, reserve, and honorably discharged members of the U.S. armed forces. In some cases, spouses and children of fallen soldiers may also be eligible. The VA home loan is one of the best benefits for eligible applicants. Not only is no down payment required, mortgage insurance also isn’t required. Mortgage rates are often below-market, making this loan very affordable. Many millennials have chosen to serve in the U.S. armed forces. The VA loan makes it possible for them to provide a home for their families.

The FHA home loan is very popular among first-time homebuyers and seasoned buyers, alike; one in four new home sales are actually insured by the FHA. This is because the FHA offers low-cost 3.5% down loans with excellent terms to eligible buyers. Unlike USDA and VA, buyers from any financial situation or background can be approved for a FHA loan as long as their income can budget the monthly mortgage payment. Since it is so inclusive and widely available, buyers continue to choose FHA over comparable loans.

FHA is a reasonable loan choice for millennials who don’t have a lot of reserves at hand for a down payment and who don’t meet USDA’s and VA’s guidelines. The 3.5% down may be daunting at first, but the amount can actually be gifted to the buyer from an approved source such as a family member, employer, or religious organization. The funds can even come from multiple sources, so if the buyer doesn’t have all the funds themselves, they can receive them elsewhere.

Potential homebuyers shouldn’t be intimidated about buying a home. Multiple mortgage programs on the market are practically designed in favor of buyers who come from financially challenging situations. Millennials especially, who are facing hurdles that are unique to the younger generation, can even achieve homeownership with help from government insured loans through FHA, USDA, and VA.