Many first-time home buyers are Millennials, but we are seeing a large part of this generation hesitating to make the leap into homeownership. Which begs the question, why the hesitation?
Recent surveys have uncovered that potential buyers believe that you need at least a 10% down payment to purchase a home. This incorrect perception has resulted in many Millennials to renew rental agreements because they don’t have a clear understanding of closing costs, or believe they lack the cash necessary to purchase a home.
Let’s look at a recent example of a young customer we just assisted. In this case, the buyer came to us unaware of options. We looked at a 30-year fixed rate mortgage, with a 5% down payment. Our buyer was cash short, for both the down payment and closing costs. To help our buyer, family members pitched in to gift them the down payment. (This is allowed under current guidelines.) Our customer had enough saved for closing costs. The gift for down payment and/or closing costs can come from any family member, even for a conventional fixed rate.
Other options are available for some buyers, such as the FHA Mortgage (3.5% minimum down payment), WHEDA First-Time Buyer Program, Federal VA Program (0% down payment) and USDA Rural Housing Program (0% down payment).
There are many options available for first-time buyers who are qualified to buy but may not have all the cash available for a down payment and closing costs. We urge interested buyers to seek advice from local lenders who will spend time advising and informing customers as they make home buying decisions.
The first important step is to go through a pre-approval process to make sure it’s the right time to start the home purchase journey. At Wisconsin Mortgage Corporation, we take great pride in preparing our customers for that journey.
-a letter from John Inzeo, Vice President of Wisconsin Mortgage Corporation