With home prices rising, many first-time home buyers are using the bank of Mom & Dad for the down payment. In fact, the FHA reported that 26% of mortgage borrowers using an FHA loan received down payment assistance from a relative. This was up from 2011 when the percentage was 22%.
Since conventional mortgage require as much as 20% down, especially if buyers want to avoid paying private mortgage insurance, it’s harder for first-time home buyers to afford the down payment. When these buyers enter the Mint Hill real estate market, many are seeking help from their parents for the down payment.
Even buyers using FHA loans, which require as little as 3.5% down, still need assistance with the down payment.
Affordability is an Issue
The housing market has seen prices rise, which makes it harder for new buyers to enter the market. With higher prices, comes higher down payments and many buyers have to find assistance with the down payment. Many are even waiting to see if home prices will come back down before they buy.
Student Loan Debt Causing Buyers to Struggle
Another reason why so many first-time home buyers are turning to the bank of mom and dad is the debt they collected from going to school. It’s hard to stockpile enough cash for a down payment when buyers have to pay a large student loan bill every month.
Since 2004, the home-ownership rate for those under the age of 35 has fallen 8%. Only 35% of home buyers in 2017 were 35 years of age or under.
Assistance from Relatives isn’t New
While getting assistance with the down payment from relatives isn’t new, it’s certainly on the rise. There are many reasons for this including the higher debt and rising home costs. In addition, many first-time home buyers have a lower credit score. The average borrower’s credit score was 670 in the FHA report, which is the lowest it has been since 2008.
According to the FHA report, it doesn’t look like this trend will be changing soon. The number of buyers looking at houses for sale in Mint Hill, NC and receiving assistance with the down payment may continue to rise. It’s likely this will remain a trend until home prices come back down.
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