Based on a survey from Apartment List, millennials in America’s large cities would need at least 10 years to save for a 20% down payment on a home.
Ah, down payments. One of the main sticking points keeping the younger generation from buying homes—and not necessarily due to overspending on tech toys and avocado toast. It’s more likely due to rising costs of living coupled with stagnated wage growth.
According to A Millenial’s Guide to Spending (And Saving) with Modest Wages, “Stretching an entry-level paycheck in today’s world is a different game than past generations experienced … the cost of living has increased disproportionately meaning each dollar earned does, in fact, buy less than it did 20 years ago.”
But Millennials are showing interest in home buying, despite these obstacles. They want the American Dream just like everyone else—they just aren’t able to throw down large sums for a down payment because most of them don’t have more than $1,000 in savings.
The good news about mortgage down payments
If you’re a millennial, I’m here to tell you that your down payment on a home can be 5% or less. That’s in the range of two paychecks. 20% down is only required to avoid paying mortgage insurance. Though that extra insurance is tacked on to your mortgage payment, it can be worth the cost to get into the real estate investment game. You’ll be stabilizing your monthly output toward having a place to live and building equity, instead of seeing your rent rise every year without anything to show for it.
Of course, it’s vital that you ensure the mortgage you get is a good one and is something you can afford five, 10, 20 years down the road. But if the size of your down payment is the only thing keeping you from buying a house, you might want to consider taking the plunge!