When I have a captive audience of young adults, I like to ask them what concerns them about their personal financial situation. The number one answer (consider this unscientific anec-data) is how to afford a first time home purchase.
First, the problem (hint, it’s NOT avocado toast)
- High home prices and elevated interest rates
- Incomes not rising to keep pace with increased real estate prices
- Lack of building of starter homes
- Older homeowners not moving out/downsizing of their family homes, further squeezing inventory
- High rents make it difficult to save for a down payment
- High levels of debt, often student loans, that take up much of the monthly budget
- Feeling overwhelmed by the process and not knowing where to get advice
What’s a young person to do? First, ask for help!
There may be programs available to get over that down payment/high interest rate hump. For example:
- Down Payment Assistance (DPA) Programs: Many states, cities, and counties offer grants, forgivable loans, or low-interest loans to help with down payments and closing costs. In Colorado, examples include:
- metroDPA(Denver) provides down payment assistance for buyers with qualifying incomes.
- Boulder County, Aurora, and Pueblo Countyhave local programs offering cash support for down payments, often up to $10,000 or a percentage of the home price, typically with education requirements.
- CHFA(Colorado Housing and Finance Authority) programs offer fixed-rate mortgages plus down payment and closing cost assistance for eligible buyers state-wide. There are also targeted options for first-generation buyers.
- National and Federal Programs:
- FHA, VA, and USDA loans: Low or no down payment mortgages for qualifying buyers.
- Fannie Mae’s HomePath Ready Buyer™: Up to 3% of the home price toward closing costs if buyers complete a home buyer education course.
- Good Neighbor Next Door: Discounts for teachers, police officers, firefighters, and EMTs.
- First-Time Home Buyer Tax Credits and MCC (Mortgage Credit Certificate): Reduces overall taxes by crediting a portion of mortgage interest paid yearly
I can’t emphasize enough the importance of connecting with an experienced mortgage broker to navigate the options with you. Don’t wait! You don’t need a huge savings account to start getting educated.
I fear that many young homebuyers on the sidelines simply because they aren’t getting quality advice. And the sooner they get into that first home, the sooner they start building that important class of wealth.
