Survey results released Wednesday shows half of Millennials plan to seek help from family in putting together down payment funds for a home.
According to a consumer survey conducted by Trulia, 60 percent of American adults age 18–34 say a lack of savings, poor credit, and severe debt stand between them and homeownership. As a result, 50 percent would have to ask for help from their parents or grandparents to put together enough money to clear the initial hurdle of making a down payment.
"Saving up for a down payment is a big obstacle and it can make the home buying process even more intimidating," said Michael Corbett, a real estate expert at Trulia.
For those having to turn to the "Bank of Mom and Dad," Corbett says all parties involved should treat the matter like a bank loan—complete with a written contract and negotiated monthly payments—in order to avoid "woes among family members."
In other strategies, 37 percent of Millennials surveyed said they plan to take on a second job in order to save up, and 22 percent intend to use a state or federal government program for assistance.
Meanwhile, as prices rise, nearly seven in 10 respondents said they've narrowed their shopping to homes priced under $200,000. However, nearly half don't know how much money they would even need for a down payment, and out of those that do, two in five say they would put down less than 10 percent—a choice Corbett warns against.
"The goal should be a 20 percent down payment," he said. "It gives you some equity from the start, gets you a lower interest rate, reduces your monthly mortgage payment and lets you avoid [private mortgage insurance] monthly fees."
In another study released by TD Bank in late May, 65 percent of homebuyers in the last decade said mortgage insurance premiums brought their monthly expenses up higher than expected, with 30 percent of Millennials admitting the higher cost of insurance has forced them to delay their house purchase or seek a smaller home.
The study also found that, despite the state of their finances, many Millennials would be unwilling to part with what the company calls "life's little luxuries." According to Trulia's findings, the top item young adults today say they could never give up is their car (65 percent), followed by their smartphone (45 percent).
Also making the list of "must-have" expenses are cable and Netflix subscriptions, with 20 percent and 15 percent unwilling to sacrifice their subscriptions, respectively.