Young people have long been stressed about their finances. Recent inflation and higher interest rates have joined forces to render the American Dream of home ownership nearly impossible for all but the highest earners. Throughout 2023, only 4% of home buyers were under the age of 24. Interestingly, that is the same percentage of buyers on the other end of the age spectrum, the Silent Generation, now over 76 years of age.
Millennials (ages 24 to 32) bought homes at a rate three times higher, comprising 12% of 2023 buyers. While better, this statistic is not encouraging, as a sizeable majority of home buyers were in their 30s, 40s, 50s, and 60s. For younger Americans striving to form households, start families, and begin the lengthy process of building equity in their homes, these past two years have been nightmarish, as interest rates increased from about 3% to over 7%. At the same time, home prices rose (along with the price of most everything else).
Many younger people are all too familiar with the disappointment of being turned down for a conventional mortgage. Nationally, lending standards remain restrictive, as conventional providers are restrained by regulatory agencies. Qualifying for any home mortgage is difficult, and younger people are being forced into smaller and less desirable dwellings. Too often, those buyers will need to “trade up” soon, as their family and career needs grow.
For younger Americans seriously contemplating a first home purchase or even an upgrade from their current abode, there is some good news. Creative financing is available for would-be home buyers who are willing to take the initiative. While financial institutions are generally bound by restrictive lending guidelines, independent investors and mortgage brokers often team up to creatively fill demand in the mortgage market.
Non-traditional borrowers need to link up with innovative lenders. Van Wie Financial works with a variety of such lenders, and we can recommend avenues of pursuit for otherwise disappointed buyers. One of our preferred providers was recently able to help a customer who had $93,000 in credit card debt, with interest rates ranging from 17% to 22%. There are also assistance programs for young people sincerely desiring to own their own residence.
Budgeting for young couples, with or without children, is a complex and difficult exercise and can reveal the true state of their financial position. Remember that there are two sides to the home-buying equation: income and expenses. Identifying weaknesses and strengths in each area through budgeting is helpful when looking for a suitable home purchase.
Moving forward after being declined for a traditional mortgage requires ambition, planning, and creativity.
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