Housing appreciation and a shortage of affordable homes are what make it challenging for many first-time homebuyers to enter the housing market. Millennials often face another hurdle—college debt that now stands at $1.6 trillion according to a recent report by the Federal Reserve Board.

When asked what’s holding them back from buying a home in a recent Bankrate survey, millennials pointed to their income not being high enough (52 percent), the cost of living (45 percent), and student debt (23 percent).

So where is the good news?

First of all, it seems that millennials, even those saddled with college debt are optimists. In a survey by Asperion Care, 85 percent said they expected to own a home at some point in their lifetimes.

The timeline may look longer than it did before for a variety of reasons: higher cost of entry, staying in school longer, delaying marriage and having children later.

For the college-educated millennial, it looks like that home ownership optimism may have more than wishful thinking behind it. According to findings by the Federal Reserve Board in 2017, college education is associated with markedly higher homeownership rates regardless of debt status, which increases at each additional level of college attainment. That could have to do with the fact that people with college degrees have higher incomes, helping to offset the debt burden.

And it seems that millennials are getting creative when it comes to finding ways to buy their first home. First of all, they are more likely to save their own money for a down payment than their Gen X peers. Some are going into home ownership as a joint effort between friends whose resources, and credit scores, when pulled together make the prospect doable. Of course, this calls for planning ahead to anticipate when one or both want to move or sell and how to handle the ending of this financial arrangement on good terms.

Millennials are also turning to gifts from family and friends for help in securing the money needed to make the down payment as well as seeking out first-time homebuyers’ assistance programs. Some of those include: First Time Homebuyer Assistance Program in Corvallis, and the Extra Step and Project Reinvest Program for homebuyers in Linn, Benton, and Lincoln counties.

Unfortunately, another option some millennials are choosing is to dip into their retirement savings to purchase a home, thus sacrificing future security for immediate gain. It is not something I would recommend not I doubt would any financial counselor.

Another option some millennials are choosing is to buy a home with a smaller than 20% average down payment. Depending on the market and the lender, buyers can sometimes purchase a home with a down payment as low as 3%. That comes at a price, however. Any loan secured with less than a 20 percent down payment requires private mortgage insurance to protect the lender which can add to the monthly mortgage payment. It also can trigger a higher interest rate on the loan which in the long run, will cost the borrower more but may be the difference that allows him or her to enter the market.

In Lake Oswego’s competitive housing market, most loans require the 20 percent down payment. The millennials I see entering the market here are either getting help from family or are leveraging appreciation they’ve earned in a different market (say from a home sale in Northeast Portland or Gresham) to make the jump to moving to Lake Oswego.

Prior to 2020, the VA limited loans requiring no down payment to $484,350 which didn’t make it a viable option for many first-time homebuyers in Lake Oswego. But as of January 1, the VA will not cap the size of a loan a veteran can get with no money down, paving the way for millennial veterans to buy higher-value homes. Since the VA only guarantees that the lender is a good credit risk and is not the one issuing the loan, the lending agency itself may still issue a cap and deny a large loan. But the denial won’t be coming from the VA so it’s worth looking into.

Buying a home is big step at any point in life and as with anything where financial stakes are on the line, it’s best to get expert advice before proceeding. That means meeting with a loan counselor who can lay out your best options for financing a home purchase.

As a Realtor in the Portland metro area and Lake Oswego in particular, I’d be more than happy to refer you to someone and help you sort out the type of house you can afford and where best to start your homebuying search. Give me a call at 503.939.9801 and/or check out my website. I’d love to put my over 30 years’ experience to work helping you find your new home.