How Mortgage rates are killing the American Dream for Millennials

Millennials are starting to overtake older generations in terms of homeownership. While they may have gotten a later start, often due to crushing student loan debt, they are entering the market as they edge toward their 40s. Interest rates, along with other financial concerns, have been slowly chipping away at the American dream for many millennials. How are interest rates impacting this dream of home ownership?

Current Mortgage Rates

Of course, the most reliable way to find out the latest mortgage rates is to talk with a lender. At the time we wrote this, they were at 4.341%. That’s the thing about mortgage rates; they change regularly. The highest rates recently have been sitting at nearly 5%.

The frequent adjustment of mortgage rates, along with other financial factors, have been concerning for millennials who want to enter the home buying market.

What Millennials Want

It’s also interesting to note the things that millennials want when buying a new home are very different than their Baby Boomer and Generation X counterparts.

There has been a perception that all millennials want to live in urban environments where they can ditch their cars and walk to farmer’s markets. Studies over the last decade haven’t proved this to be true for every millennial entering the home buying market.

The American dream of a suburban home in which to raise a family and enjoy a comfortable life is not lost on the Millennial generation, but they’ve had to make adjustments. The high cost of buying a home on top of already crippling debt, most often caused by student loans, is a challenge for many of the generation’s dreams.

Biggest Mistakes

One of the biggest mistakes facing millennial homebuyers is the failure to take into account additional costs. A mortgage isn’t the only expense in buying a home. While it can be difficult, it’s not impossible to get a mortgage when you carry student loan debt.

To consider the additional costs, it may be helpful to look at alternative ways to get the money. For example, millennials can take out a title loan to help pay for things like closing costs and any improvements that are necessary for the new home.

A title loan offers the ability to leverage the title of your car to get money fast to cover a wide number of expenses. Title loans are faster than traditional loans and have no qualifications in terms of what the funds can be used for.

Making Sacrifices

The myths surrounding millennials and their financial futures have been permeating American culture for the last decade. There has long been this idea that millennials are entitled and self-serving. But that isn’t the entire truth.

In 2017, an Australian millionaire called out his own generation by suggesting that more would be able to buy homes if they would just stop buying luxuries like avocado toast and expensive coffee. Since that time, the myth has been smashed.

Millennials are willing to sacrifice things to make their American dream come true. They do know that by tightening their belts they can save money, even in the smallest increments, to be able to buy their first home.

The real trick isn’t just making sacrifices, it’s a series of good financial choices that can put younger homebuyers in a better position. Such small changes include:

  • Making a household budget
  • Simplifying
  • Cutting back on spending
  • Raising your credit score
  • Paying off consumer debt

Buyers may also be interested in making other sacrifices to buy a home. For example, they may choose a smaller home in a more in-demand location to spend less money overall. They may also be willing to live further out from metropolitan areas and reduce costs.

Easing Home Ownership Stress

Buying a home is not without its stress. Anxiety can creep in even when things seem to be going well. There are ways millennial homebuyers can ease the stress of homeownership.

One cause of stress is buyer’s remorse. Some millennials end up regretting their choice of home. This may be because they’ve had shopping fatigue or feel like they have to settle for something they don’t love due to their financial outlook. That doesn’t have to be the case.

Before buying a home, it’s recommended to meet with a mortgage lender to walk through the process. They can offer a prequalification to help buyers better understand their homebuying budget. That way, buyers can look for a home within these parameters and not face heartbreak when they can’t get what they really want.

Millennials should also speak with agents who truly understand how to work with this younger generation. Millennials, more than any other cohort, are looking for a hands-on experience making use of digital technology and internet resources. Communication is important, but they may prefer that it comes in the form of text messages or emails.

Know that it’s okay to have feelings of concern as a first-time home buyer. Use resources available within the community to face this process with as much information as possible.

It may feel like mortgage rates are killing the American dream of owning a home for millennials, but with a little ingenuity and preparation it doesn’t need to feel dire. Millennials can and will be able to buy homes in desirable locations and secure the loans they need to do so.