More Millennials Turn to Bank of Mom, Dad
April 13, 2018
Rising home and rental costs are pressing millennials to expect more from their parents. About 17 percent of millennials—those born between 1981 and 1996—expect their parents to help them with their first down payment on a home, according to a report by Apartment List, based on about 13,000 responses.
The Apartment List survey also showed about 8 percent of millennials who are not students get some form of financial help from their parents to cover monthly rent; one-third of those renters have their rent paid in full by their parents.
Mike McCann, a real estate professional with Berkshire Hathaway HomeServices Fox & Roach in Philadelphia, says he’s seen an uptick in parental involvement when working with young adults on a home purchase. Often, he says the help is through a gift letter or a documented cash down payment gift that is part of a loan application.
But research from the National Association of REALTORS® shows the number of young adults needing this type of assistance could be much higher. Nearly a quarter of buyers under the age of 38 used a gift from a friend or a relative to help with a down payment, according to the association’s generational trends study, released last month.
Jessica Lautz, NAR’s director of survey research and communications, told Philly.com that one of the key indicators that more young people are relying on their parents for financial help is that one in five millennials move directly from their parents’ home into homeownership. That is the highest rate in the last 30 years, according to NAR.
“Rents are very expensive in many areas of the country, so by skipping having to pay rent and being able to live at home, you’re able to save for a down payment faster,” Lautz says.
Student loan debt is also an important factor. Eight in 10 student loan borrowers say they weren’t able to save for a down payment on a home purchase because of their loans, according to NAR research. More than half couldn’t qualify for a mortgage because their debt-to-income ratio is too high.
Source: “How to Buy a House or Pay for Rent? Mom and Dad Might Help,” The Inquirer/Philly.com (April 11, 2018)
Updated: July 19, 2018