MORE PARENTS ARE HELPING THEIR KIDS WITH DOWN PAYMENTS
Millennials are increasingly expecting their parents for greater help when it comes to housing. A report from Apartment List that surveyed 13,000 people born between 1981 and 1996 found that 17 percent of them expect their parents to help them cough up a down payment on their first home.
The survey also reveals that another 8 percent of millennials who aren’t students get some form of financial assistance from their parents in order to pay their rent. Of that 8 percent, one-third have their rental costs in full covered by their parents.
This trend has not gone unnoticed, said Mike McCann, a real estate professional with Berkshire Hathaway HomeServices Fox & Roach in Philadelphia. He told Philly.com that he’s seen a growing number of parents getting involved with their children on their first home purchase. Generally, parents provide assistance in the form of a gift letter or documented cash down payment gift as part of their loan application.
Despite the Apartment List findings, the National Association of Realtors says the number of parents helping out their kids in this way could be much higher. In its recent generational trends survey, the NAR found that almost a quarter of home buyers aged 38 or younger relied on a gift from a friend or parent to come up with a down payment.
Jessica Lautz, director of survey research and communications at the NAR, told Philly.com that one in five millennials have moved directly from their parents home into their own property. She reckons this is a key indicator that young people are increasingly relying on parents for financial help.
“Rents are very expensive in many areas of the country, so by skipping having to pay rent and being able to live at home, you’re able to save for a down payment faster,” Lautz said.
Another important factor is student loan debt. Additional NAR researchsuggests that as many as 8 out of 10 student loan borrowers are unable to come up with a down payment due to these commitments. Over half failed to qualify for a mortgage because their debt-to-income ration is too high.
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