Did you know that Millennials (born between 1981 and 1997) are less likely to be homeowners than Baby Boomers and Gen Xers?
How is it that Millennials, the largest generation in US history, seem to be unable to afford to buy their own home?
Two Words: Down Payment.
According to the Urban Institute, 53% of millennials say that they don’t think they can afford a down payment to buy a home.
Here’s the thing that most millennials don’t know, a potential home buyer does not need a large amount for a down payment.
In all actuality, you can find 12 percent down payment at most agency mortgage companies and Federal Housing Administration (FHA) loans can be as low as 5 percent or less!
Now that you know a down payment to own your own home is within reach, let’s talk about how much you need to save per month for various down payment amounts to buy your first home by 35 years old.
Federal Housing Administration (FHA) loans can be as low as 5 percent or less!
The calculations below assume a 5 percent rate of return on investments and a price of $275,000 (the median home price in the U.S. as of February 2019). You can afford to buy a home by age 35 (or in 15 years) with these simple savings.
CNBC helps us crunch our numbers.
Start saving at age 20:
- 5 percent down payment: $51.23/month
- 10 percent down payment: $102.88/month
- 20 percent down payment: $205.77/month
Start saving at age 25:
- 5 percent down payment: $88.55/month
- 10 percent down payment: $177.10/month
- 20 percent down payment: $354.19/month
Start saving at age 30:
- 5 percent down payment: $202.19/month
- 10 percent down payment: $404.38/month
- 20 percent down payment: $808.75/month
Since these figures only cover the down payment, it’s likely that you’ll need a bit more for closing costs, insurance, taxes and actual moving expenses.
This is a great place to start! Having a great financial friend and a trusted realtor in your life will be a huge help as you prepare for a future of home ownership.
You can buy a home and save for a down payment. You can start early and get a head start or start exactly where you are right now. The latter will just require a little more intentionality and focus. The good news is you’ve got a Financial Friend to help walk you through it.