Millennials in the housing market: Getting mortgages is easier than you think
While it may seem like a lofty goal for most millennials, home ownership is actually attainable with the right strategy and know-how. Today we’re going to dive into the topic and bust some myths around mortgage attainment for millennials. Below there is a quick overview of key statistics, myth busters, and resources to learn more.
What are these numbers showing exactly for millennials? That millennials are top candidates for mortgages. In fact, many millennials are able to find a strategy that gets them into their first home smoothly and in a money smart way.
- 53% of all funded mortgages in Ontario were by millennials
- 57% of millennial funded mortgages are for new mortgages
- 79% of millennials are funding homes not condos
The nesto Quick Take
The one thing that holds most millennials back from securing mortgages? Traditional beliefs, or let’s call them what they are: myths. To break through the smoke and mirrors, here’s the truth behind it all.
Myth 1: “I can’t afford to save up for a down payment, period.”
The Truth: It costs less than you think to get into home. Down payment minimums aren’t as high as they seem. Down payments can be as low as 5% of the purchase price. A downpayment of less than 20% includes the absolutely lowest rate, compared to 20% down payment, which is often much higher as the risk, or cost of CMHC default insurance is carried by the lender.
Myth 2: “I don’t think I have good enough credit.”
The Truth: A credit score of 680 with no major missed payments in the last 2 years is considered Perfect Credit. As long as you have had access to credit for 2 years (i.e; car loan or credit card) a score of 680 is all you need to get into home ownership and more, get the best rates, too!
Myth 3: “I can’t ask my parents for help…”
The Truth: The bank of mom and dad is REAL. Buy what you can when you are ready, and don’t compare yourself to instagram pics, because not all of us have a bank of mom and dad to make our first home our dream home.
What’s next for millennial home buyers:
Now that the myths are busted, and that mortgages can be an easily obtainable thing for millennials…Let’s discuss what the next steps should be:
- Get organized. This means reviewing credit score to know exactly what your number looks like and how to improve. Lenders will want to know what your overall financial situation is starting with this metric, your credit score.
- Begin budgeting. While yes, it’s possible for a percentage of Millennials to get their down payment from family or through major life events like marriage, that doesn’t mean budgeting for a down payment should be neglected. Look into other costs that exist when buying a home (i.e; moving costs, closing costs,etc.). The mortgage approval process will confirm how much you can afford, but more importantly, is how much you’re comfortable spending and saving.
- Pro tip: Use a High Yield Savings account or general investment portfolio (if the goal is 3-5 years out) to get the most return on your savings.
- Shop around. Start getting comfortable with mortgage lingo and terminology. In other words, become a student of the mortgage and home buying process. In other words, no one knows everything that they don’t yet know, so never stop learning. By doing this, you can find a mortgage and a strategy with confidence to kickstart your home ownership journey!
Resources to consider to better prepare Millennials:
First-Time Home Buyer Mortgage Guide
Freehold VS Condo Townhouse – Which one is right for you?
How to Make an Offer on a House
Should You Borrow for Your Down Payment?
First-Time Home Buyer Land Transfer Tax Rebates Across Canada
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