Millennials are America’s youth, who are now coming of age when it comes to owning their first home. Millennial shoppers are between the ages of 18 and 34, and their financial lives are very different from those of their ancestors. Challenges many have faced include: unemployment, high student loan debt, and poor credit. Thus, for many millennials, their ability to buy and finance a home has dwindled in their twenties. But as they enter their thirties, Millennials will be an ever larger group in the home buying market. In the National Association of Realtors’ (NAR) “Field Guide for Millennial Homebuyers,” updated August 2014, Harvard University’s Joint Center for Housing Studies found that “the number of 30-year-old households should increase by 2.7 million over the next decade, which should boost demand for new homes.”
The entry of Millennial children into the home buying market is a good sign that home sales are improving. When first-time homebuyers are a significant part of the real estate market (currently almost 40%), it means that the real estate market is stabilizing and even trending upwards.
For many first-time homebuyers, the ability to make a down payment of 5% or more plus closing costs is a major barrier. Real estate industry researchers estimate that fifty percent of millennials will ask their parents or someone in their family for a down payment on a home. The other 50% will aspire to be a homeowner with their own resources. To qualify for mortgage financing, these Millennials must be employed and in good standing with their credit.
For REALTORS selling to the Millennial age group, the steps to buying a first home have not changed, although the needs of this particular age group are different than their predecessors: Generations X and Y. These older generations bought their first homes during more prosperous economic times when jobs were plentiful. Many were able to keep their properties during the recession and are now considering selling and moving to upgrade and get more space or downsize for retirement. Millennials will be your buyers, and they will also activate Baby Boomers.
There are a few options that REALTORS can recommend to first-time homebuyers pressured by down payments and closing costs. If millennials have good credit and want help with down payment and/or closing costs, some states can provide this kind of assistance, with special programs that reverse the costs on the mortgage and/or charge zero interest on the amount needed, or even forgive the down payment debt after a certain number of years.
Homeowner Assistance Programs for First Time Homebuyers in Virginia
For first-time homebuyers in Virginia, the Virginia Housing Development Authority (VHDA) loan programs are worth investigating. The goal of the VHDA is to help Virginians purchase quality, affordable housing. There are several 30-year fixed-rate mortgage programs to choose from: conventional fixed-rate mortgages, an FHA-insured loan with low down payments, or FHA Plus, with a second mortgage to finance the down payment. Depending on the area where the home is purchased, a homebuyer may be eligible for a government-insured zero down payment loan from Rural Housing Services (RHS). There are also Veterans Administration loans for those who qualify. VHDA is a privately funded organization that makes all of these programs available through an agency and makes it easy to apply. Visit http://www.vhda.com for more information on home loan programs.
First Time Home Buyer Savings Plans (FHSP)
In 2014, the Commonwealth of Virginia legislature, recognizing that first-time home purchases are an indicator that the economy is healthy and growing, decided to implement a program to strengthen this market. The First Time Home Buyer Savings Plan (FHSP) was established to stimulate more first time home sales now and in the future. The FHSP can be established by any Commonwealth resident as a tax-free state savings account that can accumulate up to $50,000 to cover the cost of down payments for home purchases in Virginia. These special savings accounts are only shielded from state taxes as long as the funds are used to purchase a home in Virginia. Future homeowners, or their parents or relatives who want to save money on their behalf, can set up FHSP accounts. If the funds are used for anything other than a first-time home purchase, then the funds are subject to customary Commonwealth of Virginia taxes and fees.
The FHSP program in Virginia is another example of how first-time homebuyers are encouraged to complete their first home purchase and move the economy forward.
In addition to securing financing for a home, first-time homebuyers have other decisions to make before buying. The property must be a good investment that is conducive to resale if the homeowner wants to move on to another property. A first home is more likely to be a good investment if it is close to shopping, dining, and entertainment. A close look at a home inspection will reveal any pressing issues with the property and title insurance should be able to be obtained. A good qualified REALTOR can handle all these inquiries and details.
