Homeownership is a goal that many individuals strive to achieve, but as anyone who’s ever looked into buying a home can attest to, it’s not an easy task.
For younger generations, the barriers to homeownership are high and seemingly insurmountable.
From student loan debt to lack of credit history, younger generations face more obstacles than ever when trying to purchase a home. What’s worse is that there are also unexpected costs associated with homeownership that can push the dream even further out of reach.
Let’s take a look at some of these difficulties and how they impact younger generations.
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Unexpected Costs
Finally, there are unexpected costs associated with homeownership that can make the process even more difficult for those hoping to buy their first home soon after college graduation or settling into their first job out of school.
For example, homeowners insurance can add hundreds (sometimes thousands) extra dollars per year onto one’s yearly budget—an expense that is often overlooked by younger generations when budgeting for their first house purchase because they simply don’t know any better.
Homeowners insurance is important though; not only does it protect your dwelling and its contents against certain risks like fires or hail storms but it also provides liability coverage in case someone gets injured while visiting your property and decides to sue you for medical bills or other expenses related to the incident.
Student Loan Debt
For young adults trying to purchase their first home, student loan debt can be a major barrier.
In fact, according to EducationData.Org this amount of debt has made it hard for younger adults to save up enough money for a down payment and mortgage payments on a new home purchase. Additionally, with rising interest rates, making monthly payments on loans becomes increasingly difficult over time as loan balances remain stagnant or grow slowly due to interest accrual.
Credit History
Having no credit history—or “thin credit”—is also an issue that can prevent younger generations from purchasing a home.
Lenders rely heavily on credit score when reviewing applications for mortgages since it serves as an indicator of one’s ability and willingness to pay back loans in full and on time; however, without any proof of responsible financial management (e.g., paying off loans or having a steady job or income), lenders may not be willing to work with prospective buyers who lack credit history altogether or have very little established credit history at all.
Lack of Generational Wealth
Finding a place to call home can be one of the biggest financial investments you will ever make. Unfortunately, not all people have an equal opportunity to purchase property due to the lack of generational wealth in their family.
Many individuals come from households that have struggled for generations, leaving little money behind for future generations to build upon. This lack of resources results in families being unable to secure mortgages or credit loans, thus reducing the chances of homeownership.
This means that the benefits of ownership are being denied to many hard-working people who may also not have resources like high income or prior equity to leverage when looking at buying a home.
Gentrification in American Cities
With so much gentrification happening in cities across the country, one of the biggest casualties is homeownership. It’s a shame, really; owning a home used to be a symbol of stability and security for lower-income communities – but with gentrification has come skyrocketing prices, meaning many people are priced out of the markets they have lived in for years.
This has had a huge impact: entire communities are being disrupted as rents and prices rise out of reach, forcing well-established families out of their homes. Additionally, some struggling families may find that refinancing isn’t affordable anymore – even if they’ve kept up payments on their mortgage all along.
For every beneficial side effect to gentrification (new businesses, more income potential), there are real costs being felt in terms of decreasing homeownership options for residents who can no longer afford to live there.
Purchasing a home is no small feat, especially if you are part of the younger generation faced with unprecedented amounts of student loan debt and few opportunities for establishing credit history. Aside from these issues there are numerous other unexpected costs associated with owning a home like homeowners insurance which can make achieving this long-term goal seem near impossible! However, with proper planning and research into lending options tailored specifically towards young people looking into buying their first house (like FHA loans!), obtaining this dream may not be out of reach after all! With determination and patience anything is possible!
