Is Student Loan Debt Holding Back Buyers?
Last week, Trulia posted a blog that questioned whether a college education was an impediment to purchasing a home for Millennials. They explained that the cost of student debt could get in the way of someone saving for the down payment on their first home.
Early in the post, Trulia talks about the importance of a 20% down payment:
“…a 20% down payment (the ideal amount home buyers should put down)”
Later, they claim that the 20% down payment is “traditional” and that it:
“…allows borrowers to avoid costly mortgage insurance, it is not uncommon for homebuyers to put 10% down (however, we recommend putting down as large of a down payment as you can afford). In the long run, putting 20% down will save you money…”
Let’s look at what is actually happening…
As far as a 20% down payment being “traditional”, a recent survey by Digital Risk showed the actual amounts that Millennials had put down as a down payment on a home they recently purchased:
20% down was anything but traditional.
Let’s also look at Trulia’s statement that “In the long run, putting 20% down will save you money…”
In a market where CoreLogic is projecting home prices to increase by over 5% in the next twelve months and Freddie Mac is predicting that mortgage interest rates will increase by almost a full percentage point by this time next year, will your buyers actually be saving money by waiting to save up that 20% down payment?