CHERRY HILL, N.J. – Aug. 2, 2016 – New research from TD Bank reveals that millennials are more conservative with their money than their youth would suggest. In fact, nearly two-thirds are saving cash in order to buy their first home.
However, 74 percent of millennials say that saving for a downpayment is still the most significant hurdle to achieving the American dream, according to TD Bank's second annual First-Time Home Buyer Pulse, which polled more than 1,000 Americans looking to purchase a first home within the next five years.
"It's encouraging to see millennials thoughtfully prepare to enter the housing market," says Scott Haymore, head of pricing and secondary markets at TD Bank. But he says that selected mortgage programs can help millennials make the transition to homeownership sooner rather than later.
- The top three priorities for millennials before purchasing a home include saving for a downpayment, paying off debt and having a steady job
- 19 percent plan to supplement their savings for a home with financial assistance from friends and family; 65 percent plan to have a spouse or partner as a co-signer
- Millennials want to pay off their mortgages quickly, with one-third (33 percent) planning to pay off their loan over a 15-year period
- Move-in ready homes continue to be the most popular choice for busy millennial homebuyers (78 percent)
- The top three features millennials seek in a home: attractive design, a nice backyard or pool and proximity to schools or childcare
Low mortgages rates top monthly budgets
- Among all respondents, 77 percent cited mortgage rates as the most important factor when purchasing a home
- 17 percent of first-time buyers have not set aside money for unexpected repairs and costs, which is probably why nearly half (44 percent) of millennials incurred up to $5,000 in unexpected costs during the mortgage process
"The costs of running a household can be a shock to new homeowners," Haymore says. "Monthly expenses for utilities, homeowner's association fees, cable and Internet can add up quickly. Factoring these in at the beginning of the mortgage process can help borrowers assess their overall budget and determine a realistic monthly mortgage payment."
The downpayment hurdle
- 65 percent of all consumers said that saving for a downpayment is delaying their first home purchase
- More Americans (one-third) are putting less than 20 percent down on a home; the percent was even higher among millennials (35 percent)
- 37 percent of first-time buyers will take advantage of mortgage affordability programs
"For many consumers, a 20 percent downpayment is a major barrier to homeownership," Haymore says. "It's often difficult to save this much cash, especially for young adults saddled with substantial student loan debt. First-time buyers are shopping for low-down payment mortgage programs, which allow buyers to put as little as 3 percent down."