In housing markets across the country, rapid home-price growth and low inventories of affordable housing make it harder for prospective homebuyers to get their foot in the door. That’s especially true for millennials, nearly half of whom identified cost of living as one of the biggest barriers to buying a home compared with other generations, according to a new Bankrate survey.

Forty-five percent of millennials (ages 23 to 38) cite cost of living as holding them back from buying a home, compared with just 38 percent of Gen Xers (ages 39 to 54) and 31 percent of baby boomers (ages 55 to 73). Student loan debt, which is now at $1.6 trillion, also disproportionately stands in millennials’ way, with 23 percent citing it as a roadblock compared with just 15 percent of Gen Xers and 5 percent of baby boomers who want to buy a home.

Bankrate’s survey gauges Americans’ ability to save for a down payment and closing costs — and their knowledge about minimum requirements — during a time when the country’s notable lack of affordable housing in many areas is a hot-button issue. Those who don’t own a home but want to often are hampered by income that isn’t high enough, coupled with high living costs. And that’s forcing younger homebuyers, in particular, to find creative ways to realize their dream of homeownership.

Other key findings from the nationwide survey:

  • Millennials are most likely to save their own down payment money (53 percent do so compared with 47 percent of Gen Xers and 45 percent of baby boomers).
  • On average, millennial homeowners needed three full years to save for their down payment; Gen Xers needed two years and nine months; baby boomers needed two years and six months.
  • Just over half (51 percent) of all U.S. adults didn’t know the minimum down payment required to buy a home.

Millennials turning to assistance programs, retirement savings for down payments

Although younger homebuyers may feel the deck is stacked against them financially, they’re using multiple avenues to fund the down payment and closing costs for their first home.

In addition to actively saving more of their money toward a down payment and closing costs than other generations, 33 percent of millennial homeowners say they used a down payment assistance program or grant, compared with 27 percent of Gen Xers.

One worrisome finding shows that millennials are twice as likely to dip into their retirement savings than other generations to fund their housing costs, which can spell trouble later on. With Americans not saving enough for retirement, tapping a 401(k) account to pay for a house can hurt millennials’ financial security in their later years.

In many cases, perceived barriers to homeownership could be easily overcome with the right guidance and education, says Bruce McClary, vice president of communications with the nonprofit National Federation for Credit Counseling. A good first step: talking to a HUD-approved housing counselor who can provide specific guidance for your situation.

Income, for example, is a factor that many people say prevents them thinking they can buy a home, but there are loan programs and down payment assistance grants to help those folks, McClary says.

“People of all income levels transition from renting to homeownership, even in housing markets that seem more challenging than others,” McClary says. “Credit issues are another area of misconception because people assume their credit doesn’t meet the right guidelines. It’s not a permanent impediment (to homeownership).”

Worries heighten with age about saving for homebuying costs

While some folks have no desire to own a home, those who do have this goal in their sights worry about being able to make it a reality. One in 3 respondents (32 percent) don’t think they’ll ever be able to save enough for a down payment and closing costs, Bankrate’s survey found. This sentiment becomes more pronounced with age:

  • 27 percent of millennials say they don’t ever think they’ll be able to save enough for a down payment.
  • 37 percent of Gen Xers don’t think they can save enough.
  • 60 percent of baby boomers feel the same way.

First-time homebuyers, as a whole, rarely put down 10 percent or more on their first homes. In fact, the median down payment amount for first-home buyers is 7 percent, according to the National Association of Realtors’ 2018 Profile of Home Buyers and Sellers.

The decline in median down payment amounts highlights the accessibility of low-down payment loan programs, but it also shows major gaps between income and home-price growth, says Jessica Lautz, vice president of demographics with NAR.

“Wages simply aren’t keeping pace with home prices,” Lautz says. Indeed, a NAR calculation from March shows that between 2012 and 2018, home prices jumped 47 percent while wages rose 16 percent comparatively.

Millennials see longer timelines to afford down payment, closing costs

Saving up to buy a home is more like a marathon than a sprint, especially for younger homebuyers.

Older generations were typically able to do so faster. Of those who were able to save in under 10 years, baby boomers needed two years and six months while Gen Xers needed two years and nine months. Millennials, though, needed a full three years.

Some of these perceptions could have something to do with the fact that Americans, in general, have skewed notions of the minimum down payment requirements to buy a home.

When asked about the minimum required down payment, 51 percent of Americans didn’t know the answer. Another 1 in 4 (28 percent) said 20 percent or more of the purchase price is required.

Just 2 percent of all respondents said 0 to 5 percent down, which is the actual standard minimum, depending on the loan program. All government-insured loans fall into this area, as well as conventional loan programs that require a minimum of 3 percent down. However, it seems respondents aren’t fully aware of these options that offer a more affordable entry into homeownership.

How to get your finances ready for homeownership

Before you start your home search, saving for a down payment and closing costs will be one of the top to-do items on your list. Here are some tips to get started.

1. Nail down a budget

Before you buy a home, you need to figure out how much house you can afford. A calculator can help you crunch the numbers, taking into account your monthly income, debts and house information. Keep in mind that a lender might approve you for a maximum loan amount, but you may not want to buy a home at the top of your budget if the monthly payments will stretch your finances or prevent you from meeting other financial goals.

2. Check your credit report and score

Your credit score and history play a major factor in the types of loans you’ll qualify for. The lower your credit score, the more difficulty you may have qualifying for a low down payment program. You can check your score through Bankrate and request copies of your credit report free once every 12 months through Doing this legwork early will give you time to improve your credit so you can qualify for the right program — and get better interest rate offers.

3. Find the right loan program

If you don’t have much cash saved, look for lenders who offer low down payment programs. Some options include: FHA loans, which require just 3.5 percent down; VA and USDA loans, which require zero down in some cases; and conventional loans backed by Fannie Mae and Freddie Mac, which require just 3 percent down.

4. Line up financial gifts early

If you plan to use a financial gift from a family member or friend as part or all of the down payment, which is allowed by most loan programs, your lender will require a gift letter from the donor. A lender will also want to see how the funds were transferred into your account and when to ensure the gift isn’t a loan — and that the donor has the funds available.

5. Create a special savings account

Saving for a down payment and closing costs doesn’t mean you should deplete your emergency savings. If possible, open a dedicated savings account specifically for homebuying expenses. If you’re one or two years out from your home purchase, consider a long-term CD account, or look at high-yield savings accounts that you can withdraw from at any time.

6. Consider housing counseling

If you’re a new homebuyer, speaking with a HUD-approved housing counseling agency is a good first step toward understanding the process. The services are typically free or minimal cost, and you can glean advice without sales pressure on how to get your finances into shape before you sit down with a lender.


Bankrate commissioned YouGov Plc to conduct the survey with 2,582 U.S. adults. The survey was conducted online from July 31 through Aug. 2. The figures have been weighted, employing a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results. To determine the average number of years to save for a down payment (actual and anticipated), an estimated average was calculated based on the polling response ranges provided.

Learn more: