February 9th, 2020 10:53 AM by Jackie A. Graves
There is no question: it is hard for a first-time buyer to enter
the housing market today. The aspiring buyer faces record-breaking low
inventory levels, rising rents, and student debt loads that make it difficult
to save. But for some, there is a way that does help: they turn to the trusted
bank of mom and dad.
One-third of first-time buyers used help from friends or family
to purchase a home in the last year. Twenty-seven percent received a gift from
friends or family and five percent took out a personal loan. Many first-time
buyers combine this with savings, as 78% of first-time buyers did use savings
Using family as a source of downpayment help is most common
among younger millennial buyers (ages 20 to 28) compared to other generations,
and is more common among unmarried couples. Both sets of buyers have lower
household incomes so may be less likely to scrape together the funds
Another way family is helping out is by allowing first-time
buyers to skip the renting cost by living at home before buying. Nearly
one-quarter of first-time buyers are moving directly from their parents,
friends or family members’ home into homeownership. This share has steadily
increased from a low of 12% in 1993 to 23% today. While renting is still the
most common prior living arrangement for first-time buyers, it has steadily
decreased from a high of 82% to a low of 71%.
Among younger millennials, 30% moved directly from a family
member’s home into homeownership. This was more common of an arrangement among
single males and unmarried couples before buying a home.
This living arrangement provides a number of benefits: not only
can a first-time buyer save for a downpayment without the cost of rent, but
they can also pay down any debt and get their debt-to-income ratio check. It
may also be easier to navigate the tight housing market, as the buyer does not
need to line up when a rental lease ends with the timing of purchasing a home.
They are free to put down contracts on homes, which they may not get, with less
pressure of where they will live if they lose out.
However, doubling up only works if it works well for the family
they are living with as well. Some families may not have the room, or may want
assistance with costs—such as utilities and groceries. Among all first-time
buyers who moved directly from a family members’ home into ownership, half did
pay some rent in the arrangement.
Source: To view the original article click here