The challenge of saving for a down payment is a constant struggle for many first-time home buyers in Chicago. According to the Washington Post, the housing market is missing one specific group: young first-time home buyers. Realtors are commenting on the low numbers of this young generation that they are seeing in the marketplace. The Millennial age group has many challenges to face; however, hope is on the horizon with new mortgage plans.
First-time home buyers usually range from 25- to 35-years-old. This is also one of the age groups that were hit hardest during the recession. Since then, unemployment is still higher than average, and the jobs available typically offer lower wages or are part-time. The low wages make it hard for a young adult to save the money needed for a 20 percent down payment for a new home, especially when they add in bills such as student loans or credit cards.
Student loan debt is one of the most common debts young adults are facing. With a high debt-to-income ratio, student loans are making it harder for Millennials to buy a home. It’s difficult to save up for a proper down payment while trying to repay the loans, and with a low wage job, it becomes even harder.
“One of the biggest issues keeping first-time buyers out of the market is the difficulty in obtaining a mortgage,” states Anthony Hsieh, founder and chairman of LoanDepot.com.
The new lower down payment mortgage programs, being offered by lending giants Fannie Mae and Freddie Mac, will allow struggling Chicago first-time home buyers the opportunity to purchase a home. The program allows buyers to obtain a mortgage with a down payment of just three percent. This opens the doors for buyers to purchase a home without having to worry about saving up for the standard 20 percent down payment. To qualify for the three percent down mortgage, buyers must meet the minimum credit score of 620 and must be able to have proof of income, assets and job status.