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The common down payment mistake millennials make

On Behalf of | Jul 24, 2018 | Residential Real Estate |

A survey of over 1,000 adults done by Bank of the West found that 96 percent of millennials either own a home or want to. However, those in California and elsewhere who want to buy a home should have a plan to save up for one. Roughly 20 percent of those who don’t own a home yet say that they will use retirement funds to do so.

Of millennials who own a home, 29 percent used retirement funds to buy a home. That number is 12 percent higher than the average for adult homeowners. According to those within the financial industry, there can be drawbacks to using money in an IRA or 401k to make a down payment. Taking this step can be especially harmful to those who may not have enough saved for their later years. However, data shows that millennials are more concerned with owning a home than paying down debt or saving for retirement.

By paying off debts, a person will generally have more control over his or her life and be able to overcome financial obstacles as they come. Paying down debt may be easier to get a lower interest rate on a home loan and get a larger loan at the same time. Without credit card or other debt, it may also be easier to save up for a down payment.

A residential property may be the largest purchase a person ever makes. Therefore, it may be a good idea for a prospective buyer to have as much financial flexibility as possible to make that purchase. An attorney may go over the terms of a mortgage and purchase contract prior to the deal closing. This may help a person understand his or her rights and responsibilities when buying a home.