If you follow the news surrounding the housing market, you know that the reluctance of millennials to purchase homes has been a contributing factor for holding back economic recovery. New to the world of real estate, millennials face financial challenges that are magnified by factors such as student debt, a tough job market and a lack of credit history to qualify for loans. The vision of a dream home is often more grand than their budget reality.
We also know that millennials like to do things a little differently. This burgeoning generation is set on technology, getting information fast and easy, and making smart and often innovative decisions after extensively weighing their options. So how does all of this translate to house hunting? Luckily, there are several new solutions that seem to be meeting their needs.
According to the National Association of REALTORS®, a quarter of first time home buyers use gifts from relatives to fund their down payment. For those without this option, crowdfunding seems to be a new trend gaining traction care of websites like gofundme.com. Instead of a traditional gift registry, newlyweds are opting to register on niche sites like featherthenest.com that focus on helping people raise cash for real estate-related pursuits. Opinions are mixed on whether this is brilliantly practical or downright tacky, but either way it seems to be working for some future homeowners.
Down Payment Funding Without Debt
Another option is the REX HomeBuyer program, offered by FirstREX, which provides up to half of the 20% down payment and acts as an equity investment in the home rather than a loan. When the buyer sells the home they pay FirstREX an amount equal to the initial investment plus a portion of the change in market value. FirstREX shares in the risk – profiting if the home value increases and typically incurring a loss if home value decreases. With a larger down payment, buyers are able to lower monthly payments, avoid mortgage insurance, keep assets diversified, improve debt-to-income ratio and avoid borrowing from their 401k plan. In many cases the arrangement allows buyers to consider a greater range of home prices. For more information, visit http://www.1rex.com/.
Relaxed Credit History Consideration
“Out-of-the-Box” might be a term millennials deem over-used and antiquated, but hopefully not when it comes to home loans. The truth is, with recent Qualified Mortgage guidelines, many young buyers are finding themselves locked out of the market due to requirements on debt-to-income ratios and credit history records. For many, an out-of-the-box approach is what they need to be able to qualify for a loan.
RPM Mortgage, Inc. recently launched a new suite of loan solutions designed to serve qualified buyers who don’t quite fit into the Qualified Mortgage box. One product in particular helps first-time buyers who have one year of good credit history, a FICO score of at least 660 and who are interested in non-government loans. Under the guidelines of the program – just one in RPM’s new Tailored Line of products – loans are available from $250,000 and $2.5 million. And that’s plenty to get a millennial the home (or converted loft) of their dreams.
Down Payment Assistance
When family, friends and strangers on the Internet aren’t going to be able to help, there’s always the option of a down payment assistance program. The popular 80/10/10 program allows half of a 20% down payment to be financed through a second loan.