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4 Common Misconceptions Stopping Millennials from Owning a Home

By U.S. News & World Report

The vast majority of millennials think owning a home is an important part of the American Dream, on par with Americans of every age. Millennials, however, are facing some of the strongest headwinds ever. Home prices are climbing well above the rate of income growth and millennials more than any older generation are burdened by student debt.

If high home prices and student debt weren’t enough obstacles, many of them have a general misunderstanding of the mortgage and homebuying process. A study of 1,000 U.S. adults by Widmeyer Communications on behalf of NeighborWorks America showed wide variation in how much renters think they need to save for a down payment on a home. While local affordability certainly comes into play, a lack of understanding about the mortgage process and purchasing real estate are key obstacles renters must overcome to successfully become first-time homeowners.

[Read: 4 Things Millennials Can Expect When They Search for a New Home.]

The Truth About Down Payment

The first place to start is with misconceptions about down payment. There is widespread confusion about the minimum down payment required to get a mortgage, but millennials are even further off the mark.

In the same national survey, on average, Americans incorrectly think that a minimum down payment to get into a home is 17 percent, and millennials estimated the minimum at 21 percent. The truth is there are dozens of lender and government-backed mortgage programs across the U.S. that require as little as 3 percent down. The impact of this information gap is considerable. For example, a millennial who thinks she needs to save $40,000 in order to buy a typical starter house or condo selling for $200,000 actually needs $6,000 for the down payment.

The Truth About Down Payment Assistance

It’s difficult to save money these days, even enough for a 3 percent down payment. But there are resources out there for homebuyers to tap into that can bridge the down payment savings gap. But here, too, a majority of millennials are operating without full information.

The NeighborWorks America survey found that fewer than four out of 10 (38 percent) millennials are aware of the existence of down payment assistance programs for middle-income homebuyers in their community. That’s better than the 27 percent on average nationally who believe such programs are out there, but still way off from the reality. According to Downpayment Resource, an Atlanta-based company that tracks and helps consumers find programs, there are more than 2,400 down payment programs in the U.S.

[Read: Credit, Mortgages and Your Ability to Buy a Home: It Doesn’t Have to Be Scary.]

Some of these programs have income restrictions or professional restrictions — for example, a recipient has to be a teacher or local government employee — but many are open to the majority of homebuyers.

The Truth About Weak or Bad Credit

The No. 2 obstacle cited by millennials for not buying a home is bad credit (behind lack of down payment), but just over half (56 percent) of all consumers have received a copy of their credit report and score in the past year. The rest of consumers have little idea of their credit profile.

Moreover, even if a millennial has less than perfect credit there are mortgage products available that can help him buy a home. These products have FICO credit score hurdles as low as 600, although most set the bar at 620 or higher.

Working with a U.S. Department of Housing and Urban Development-approved housing counselor to identify down payment assistance programs and mortgage products that are open to borrowers with a ding on their credit is a first step to truly knowing if weak or bad credit will prevent a millennial from buying a home.

[See: 10 Ways Millennials Are Changing Homebuying.]

The Truth About Help With Student Debt

Millennials with their eyes on homeownership are living with an incredible amount of student debt. There is more than $1.3 trillion in student debt outstanding nationwide, and while a portion of that is not held by millennials, the bulk is and it is weighing on them. Half of millennials worry about their student debt all or most of the time.

However, there is help available with understanding how student debt affects homeownership. Housing counselors across the country are available to help consumers better manage their student debt with the goal of homeownership in mind. From help determining whether or not loan consolidation is the best strategy, minimum payment options or choosing a loan forbearance program, housing counselors are there to help millennials make the best choice. But only 30 percent of millennials who have student loan debt are aware of nonprofit housing counseling organizations that can help with student debt, according to the survey.

As Agent Mulder often said on “The X-Files,” “The truth is out there,” and a housing counselor is the best partner to help a millennial homebuyers find it and secure their piece of the American Dream.

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4 Common Misconceptions Stopping Millennials from Owning a Home originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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