What Could Hold a First-Time Home Buyer Back from Seeing Their Dream?

Owning a home has always been the cornerstone of the American Dream. Unfortunately, fewer and fewer young people are becoming homeowners as time goes on. According to the widely-respected Urban Institute, homeownership rates among Millennials is down about 8 percent from Baby Boomers. People aged 21 to 37 aren’t buying homes at the rate their parents did 20 to 30 years ago.

Why aren’t young people buying homes? It’s a hotly-debated issue with many sides to the conversation. Unfortunately, the chief reason stems from an inability to afford a home. There are too many first-time home buyer problems preventing up-and-coming adults from becoming homeowners—making it harder to buy a home from Alpine, TX to Zion, IL.

Student loan debt

The biggest factor preventing Millennials from buying homes is overbearing student loan debt. The average person’s student loan debt today is $37,172—roughly the cost of a new car. At a reasonable interest rate, that person ends up paying almost $400 per month against their loan. And, with such a large principal, it’s unlikely they’ll chip away at that loan very quickly. Most students have their loan for more than a decade.

Contrary to popular belief, banks don’t penalize home buyers for student loan debt—not in the same way as credit card or auto loan debt, anyway. The real burden of student loan debt is in how much it lowers the borrowing power of the buyer and strains their finances when taking on a mortgage. Thanks to that extra payment every month, a person isn’t likely to be able to afford a mortgage payment.

Healthcare hurdles

What does healthcare have to do with buying a home? Well, when you consider that about 26 percent of people have some form of healthcare debt looming over them, it starts to make sense. Not only does healthcare debt take away from a person’s buying power, it makes it extremely hard to save for a down payment.

Worse still, many Millennials are at an age where they no longer benefit from their parents’ insurance. Anyone working a job without benefits will need to purchase an affordable insurance plan… which typically comes with a high deductible. Even someone who saves diligently for a home down payment may find that savings erased by one visit to the hospital for an accident or illness.

Wage woes

It’s no secret that Baby Boomers are working longer. What this means for Millennials is a longer wait time for upward mobility in the job market. As Boomers retain their positions longer, Millennials are stuck in positions with wage caps that aren’t conducive to buying a home. Even established professionals might not be able to afford the costs of homeownership on their stagnant salary.

The American Dream is the same

Owning a home is still a cornerstone of the American Dream, but it’s becoming harder and harder to attain for younger generations. Mounting first time-home buyer problems are making it hard for Millennials and younger people to afford a house. But that doesn’t mean it’s impossible!

Consider looking for a home in a smaller town like Alpine, TX, or applying for a loan through the state’s Housing and Economic Development Authority. It’s also smart to talk with a realtor and a lender about how to make the buying process more affordable. If owning a home is your dream, don’t let the headwinds slow you down—contact Carpenter Real Estate to arrange a consultation.