Millennials are ready to break the golden rule of home-buying

Many young home-buyers don’t think it's possible to save up for a 20% down payment

National /
Feb.February 08, 2020 12:00 PM
Home buyers have for decades been advised to never put a less than 20 percent down payment on a house, but 70% of young home-buyers are willing to break that rule this year (Credit: iStock)

Home buyers have for decades been advised to never put a less than 20 percent down payment on a house, but 70% of young home-buyers are willing to break that rule this year (Credit: iStock)

Add the 20-percent-down-payment rule to the list of norms millennials are tossing out the window.

Around 70 percent of millennials said they would put down less than 20 percent of the price of a home as a down payment this year, breaking a rule of thumb that’s stood for decades, according to Business Insider. More than a quarter said they’d put down less than 10 percent, which was almost unheard of in their parents’ generation.

It’s not surprising that it’s an appealing option. It could take a renter in a high-cost city like Los Angeles nearly a decade to save up enough money for a 20 percent down payment on a home in their city.

Some agents are advising their clients not to wait, arguing it’s better for a homebuyer to get their foot in the door now and start building equity rather than wait to save up for a 20 percent down payment. It could all work out for a buyer if their home quickly increases in value.

Putting down less than 20 percent means homebuyers will have to pay private mortgage insurance — a monthly payment on top of a mortgage that’s usually between 0.3 percent and 1.2 percent of the home’s value.

But that payment is automatically cancelled once a mortgage’s loan-to-value ratio hits 78 percent or lower, which can happen if a home value increases enough. Still, appreciation could slow in the future and either way, a lower down payment means higher monthly payments.

Regardless, it seems many home-buyers don’t see much of a choice. [Business Insider] – Dennis Lynch


Related Articles

arrow_forward_ios
(Getty)
Mortgage applications to buy homes rise as rates drop below 6.5%
Mortgage applications to buy homes rise as rates drop below 6.5%
From left: Fannie Mae's Hugh Frater and Freddie Mac's Michael DeVito
Government to back home loans over $1M
Government to back home loans over $1M
(Getty/Illustration by The Real Deal)
TRD Pro: 7% mortgage rates are not so bad
TRD Pro: 7% mortgage rates are not so bad
Case-Shiller, Home Prices, Housing Market, Residential Real Estate
US home prices lose more momentum
US home prices lose more momentum
(Getty; Illustration by The Real Deal)
Agents: Life is good under 7%
Agents: Life is good under 7%
Coach Realtors' Mary Alice Ruppert (Coach Realtors Associate, Getty)
Sellers relent: Long Island home price cuts at 3-year high
Sellers relent: Long Island home price cuts at 3-year high
(Getty; Illustration by Kevin Rebong for The Real Deal)
Investor home purchases plummet 30%
Investor home purchases plummet 30%
From left: Peter Hungerford, Shai Segev, and Michelle Haruvi (Getty, LinkedIn, Zillow)
She wanted a piece of the Haruvi empire. She got an eviction notice instead
She wanted a piece of the Haruvi empire. She got an eviction notice instead
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...