There’s no denying that life is different for those just entering the workforce than it was for previous generations. Even as they delay starting families to pursue their careers, they’re still faced with one traditional milestone. Buying a home is something many millennials want to do, even as they try to pay off the debt of the student loans.
Can Graduating Millennials Buy Real Estate?
It’s not entirely out of the realm of possibility. In 2017, as many as 41% of homebuyers had student debt to one degree or another. In fact, looking back over a two-year period, we find that millennials have grown to become one of the biggest groups of homebuyers in the United States. This may be due to the fact that they can use technology and the digital landscape to fuel their search for better financial products and a wider real estate market.
The big problem that millennials face is student debt, which collectively amounts to $1.3 trillion. Financial institutions don’t differentiate debt, when it comes to qualifying people for mortgages. This means they’re still going to calculate student loan balances into a debt to income ratio analysis. To overcome this obstacle to homeownership, millennials will either have to increase their income or reduce their debt. There’s no way around that.
Investing May Hold an Answer
Instead of looking to buy their dream home, millennials might be better off to look at real estate as a business opportunity. For instance, they may want to look into starter homes. Before they even make an offer, they should have a plan for reselling it within a relatively short time. It may be easier to qualify for a cheaper home, which can be used as a springboard for launching future financial successes.
There’s also the possibility of buying a multifamily home. This is beneficial, because the homeowner can live in one unit, while renting the other units out. This provides an additional source of income that may give a debt to income ratio more balance.
In any case, even young homebuyers should always plan for emergencies, because homeownership is wrought with them. That means not sinking every penny that has been saved into a down payment. There will be more expenses down the line for which millennials will want to have money saved. Homeownership isn’t impossible for new college graduates, but it requires planning and sacrifice.