The Millennial Mortgage Problem: Down Payments and Expensive Cities

Here's how to find money for a down payment.

If you’re a millennial who’d like to buy a house before Beyoncé’s twins graduate from high school, then listen up.

The folks at Apartment List recently crunched the numbers surrounding our chances at homeownership, and they’re pretty stark. At the rate we’re going, Rumi and Sir are going to be in Freshman Comp before we get the keys to our own pads.

Why Millennials Are Waiting to Buy Homes

For its report, Apartment List surveyed 24,000 renters across the country.

Contrary to popular opinion, which says millennials are city-worshipping vagrants, 80% of respondents said they plan to buy a house or apartment. (I guess those fourth-floor walk-ups aren’t always as dreamy as they seem.)

But 36% said they plan to wait five years or more before making that purchase—a sharp increase from the 23% who had the same response in 2014.

Why? Of the reasons offered (respondents could choose more than one), here were the most popular:

  • Affordability: 72%
  • Not ready to settle down: 45%
  • Waiting for marriage: 36%

“Despite recent improvements in the labor market, millennials face a severe shortage of affordable entry-level homes in many parts of the country,” wrote the study’s authors. “This leaves millennials with difficult choices: extend their budgets and purchase at higher debt-to-income ratios, heightening the risk of mortgage default; migrate to more affordable areas; or delay buying a home altogether.”

The authors also pointed to student debt, lack of savings, and stagnant career opportunities as reasons millennials can’t afford homes.

How Long Millennials Would Have to Wait in 31 Popular Cities

After drilling into that affordability metric further, the study found that 53% of millennials cited down payments as the biggest obstacle they face in buying a home.

In fact, 68% said they’d saved less than $1,000 for a down payment—and 44% hadn’t saved anything.

One reason they might not be saving more is that they don’t realize how much they need for a down payment. In Los Angeles, the city with the biggest gap between expectations and reality, millennials underestimated the amount they’d need for a down payment by a whopping 43%.

And when it comes to the reality of home mortgages, most millennials probably aren’t going to like what they see. Apartment List determined how long it would take the average respondent to save for a 20% down payment based on how much they’ve already saved, how much help they anticipate receiving, and how much they’re saving each month. Based on those factors, Apartment List says it will take millennials between five and twenty-three years to save up enough money to afford a condo in thirty-one popular cities.

The calculations even account for increases in wages and home prices as well as returns on investment (although we doubt many people are saving for their down payment in the stock market).

Picture1

How outrageous is that?

At this rate, millennials in sixteen cities will have to wait more than a decade before they can afford a down payment—and in three cities, they’ll have to wait more than twenty years!

How to Save for a Down Payment

If you’d like to purchase a home sooner than that, the answer is simple: you have to save more.

Only 29% of the millennials surveyed are saving at least $200 each month—and as the numbers show, that’s not going to cut it.

Although you can hope the housing market becomes more affordable, you have much more control over your own financial situation.

Here are three ways to put a home in closer reach.

1. Automate Your Savings

The best way to divert money from your Starbucks addiction to your house fund is to automate the process.

To keep it simple, set up an automatic withdrawal from your checking account to your savings account. If you’re not saving anything yet, try $100 per week to start. Then, once that feels normal, increase it to $150 per week, and so on.

You probably won’t even miss it.

2. Work a Side Hustle

Thanks to the gig economy, it’s easier than ever to earn extra dough. And it’s much easier to work nights and weekends when you have a clear goal in mind—in this case, your future house.

Start a freelance writing business or drive for Uber. Whatever it is, funnel all your earnings into a special savings account that’s dedicated to your down payment.

3. Look into First-Time Homebuyer Programs

Does 20% seem totally out of reach? It might be time to look into programs for first-time homebuyers. Here are two you might not have considered.

  • FHA loans: With the backing of the Federal Housing Authority, first-time homebuyers with credit scores of 580 or above might be able to put as little as 3.5% down. For buyers with credit scores from 500 to 579, that number jumps to 10%.
  • USDA loans: If you’re buying a home in a rural area and meet credit and income requirements, you could purchase a home with no down payment through USDA loans.

You also could look into first-time homebuyer grants, which can significantly reduce the cost of a house.

One of the biggest national programs (besides VA loans for veterans) is Good Neighbor Next Door from the Department of Housing and Urban Development. With this grant, law enforcement officers, emergency medical technicians, firefighters, and teachers in “revitalization areas” can receive up to 50% off the list price of a home.

Otherwise, most grants are administered at the state or local level. To see what’s available in your area, search for “down payment assistance” or “first-time homebuyer grants” in your state. A good mortgage broker also should be able to point you in the right direction.

If being a homeowner is your dream, you shouldn’t let anything stand in your way.

Let these numbers spur you into action—and into saving! Visit Credit.com’s Mortgage Learning Center for more information on how to plan for your mortgage and your future home.

Image: monkeybusinessimages

The post The Millennial Mortgage Problem: Down Payments and Expensive Cities appeared first on Credit.com.

The Millennial Mortgage Problem: Down Payments and Expensive Cities

Here's how to find money for a down payment.

If you’re a millennial who’d like to buy a house before Beyoncé’s twins graduate from high school, then listen up.

The folks at Apartment List recently crunched the numbers surrounding our chances at homeownership, and they’re pretty stark. At the rate we’re going, Rumi and Sir are going to be in Freshman Comp before we get the keys to our own pads.

Why Millennials Are Waiting to Buy Homes

For its report, Apartment List surveyed 24,000 renters across the country.

Contrary to popular opinion, which says millennials are city-worshipping vagrants, 80% of respondents said they plan to buy a house or apartment. (I guess those fourth-floor walk-ups aren’t always as dreamy as they seem.)

But 36% said they plan to wait five years or more before making that purchase—a sharp increase from the 23% who had the same response in 2014.

Why? Of the reasons offered (respondents could choose more than one), here were the most popular:

  • Affordability: 72%
  • Not ready to settle down: 45%
  • Waiting for marriage: 36%

“Despite recent improvements in the labor market, millennials face a severe shortage of affordable entry-level homes in many parts of the country,” wrote the study’s authors. “This leaves millennials with difficult choices: extend their budgets and purchase at higher debt-to-income ratios, heightening the risk of mortgage default; migrate to more affordable areas; or delay buying a home altogether.”

The authors also pointed to student debt, lack of savings, and stagnant career opportunities as reasons millennials can’t afford homes.

How Long Millennials Would Have to Wait in 31 Popular Cities

After drilling into that affordability metric further, the study found that 53% of millennials cited down payments as the biggest obstacle they face in buying a home.

In fact, 68% said they’d saved less than $1,000 for a down payment—and 44% hadn’t saved anything.

One reason they might not be saving more is that they don’t realize how much they need for a down payment. In Los Angeles, the city with the biggest gap between expectations and reality, millennials underestimated the amount they’d need for a down payment by a whopping 43%.

And when it comes to the reality of home mortgages, most millennials probably aren’t going to like what they see. Apartment List determined how long it would take the average respondent to save for a 20% down payment based on how much they’ve already saved, how much help they anticipate receiving, and how much they’re saving each month. Based on those factors, Apartment List says it will take millennials between five and twenty-three years to save up enough money to afford a condo in thirty-one popular cities.

The calculations even account for increases in wages and home prices as well as returns on investment (although we doubt many people are saving for their down payment in the stock market).

Picture1

How outrageous is that?

At this rate, millennials in sixteen cities will have to wait more than a decade before they can afford a down payment—and in three cities, they’ll have to wait more than twenty years!

How to Save for a Down Payment

If you’d like to purchase a home sooner than that, the answer is simple: you have to save more.

Only 29% of the millennials surveyed are saving at least $200 each month—and as the numbers show, that’s not going to cut it.

Although you can hope the housing market becomes more affordable, you have much more control over your own financial situation.

Here are three ways to put a home in closer reach.

1. Automate Your Savings

The best way to divert money from your Starbucks addiction to your house fund is to automate the process.

To keep it simple, set up an automatic withdrawal from your checking account to your savings account. If you’re not saving anything yet, try $100 per week to start. Then, once that feels normal, increase it to $150 per week, and so on.

You probably won’t even miss it.

2. Work a Side Hustle

Thanks to the gig economy, it’s easier than ever to earn extra dough. And it’s much easier to work nights and weekends when you have a clear goal in mind—in this case, your future house.

Start a freelance writing business or drive for Uber. Whatever it is, funnel all your earnings into a special savings account that’s dedicated to your down payment.

3. Look into First-Time Homebuyer Programs

Does 20% seem totally out of reach? It might be time to look into programs for first-time homebuyers. Here are two you might not have considered.

  • FHA loans: With the backing of the Federal Housing Authority, first-time homebuyers with credit scores of 580 or above might be able to put as little as 3.5% down. For buyers with credit scores from 500 to 579, that number jumps to 10%.
  • USDA loans: If you’re buying a home in a rural area and meet credit and income requirements, you could purchase a home with no down payment through USDA loans.

You also could look into first-time homebuyer grants, which can significantly reduce the cost of a house.

One of the biggest national programs (besides VA loans for veterans) is Good Neighbor Next Door from the Department of Housing and Urban Development. With this grant, law enforcement officers, emergency medical technicians, firefighters, and teachers in “revitalization areas” can receive up to 50% off the list price of a home.

Otherwise, most grants are administered at the state or local level. To see what’s available in your area, search for “down payment assistance” or “first-time homebuyer grants” in your state. A good mortgage broker also should be able to point you in the right direction.

If being a homeowner is your dream, you shouldn’t let anything stand in your way.

Let these numbers spur you into action—and into saving! Visit Credit.com’s Mortgage Learning Center for more information on how to plan for your mortgage and your future home.

Image: monkeybusinessimages

The post The Millennial Mortgage Problem: Down Payments and Expensive Cities appeared first on Credit.com.

10 Cities Where Your Paycheck Goes the Furthest

can-employer-withhold-money-from-paycheck

Many people dream of living in New York or Los Angeles—rubbing shoulders with celebrities and Instagramming food from the hottest restaurants. They dream of flashy jobs and fat paychecks.

That is, until they scroll through Craigslist or Zillow and determine they could never afford a fourth-floor walk-up above a noisy bar, let alone afford to buy a house in such an expensive city.

If “they” is really “you,” you might want to consider a midsize city where your paycheck will go the furthest.

10 Cities with Excellent Cost-of-Living Ratios

For this list, we turned to a recent report by Glassdoor, which looked at salaries and housing costs for the 50 most populated metro areas across the US.

With that data, Glassdoor determined each city’s cost-of-living ratio—the median annual base salary divided by the median home value.

The results show that where you live and how much you make are directly related.

“Though there are certainly other financial factors to consider when taking into account total cost of living, this data reinforces that pay typically goes further in [midsize] cities versus big metropolitan areas, where there is often tighter competition for housing,” said Dr. Andrew Chamberlain, Glassdoor’s chief economist.

It probably won’t surprise you that New York City, Boston, and San Francisco fared poorly, with ratios of 18%, 17%, and 11%, respectively. Some of the winners might surprise you, though. Here are the 10 cities where your paycheck will go the furthest.

10. Louisville, Kentucky

  • Cost-of-Living Ratio: 39%
  • Median Base Salary: $54,000
  • Median Home Value: $137,500

When most people think of Louisville, they think of big hats and baseball bats. But this city has a lot more going for it—not least of all is its southern charm.

UPS employs more than 20,000 people here, and the city has become a major center for the health care and medical sciences industries—both of which are growing fields with good pay.

9. Kansas City, Missouri

  • Cost-of-Living Ratio: 39%
  • Median Base Salary: $58,000
  • Median Home Value: $147,500

Kansas City has the most expensive homes on the list and the second-highest salaries. You’ll find friendly people and a lot of love for the local baseball team here.

Jobs are available in health care, education, and government, and companies such as Garmin, Hallmark, and Sprint have headquarters in the larger Kansas City metro area.

8. Birmingham, Alabama

  • Cost-of-Living Ratio: 40%
  • Median Base Salary: $50,800
  • Median Home Value: $128,000

If you love barbecue, you’ll love Alabama. And Birmingham offers excellent restaurants, easy access to the outdoors, and passionate college football fans.

Its biggest industries are banking and insurance, health care, and logistics and transportation. Major employers include the University of Alabama at Birmingham, Regions Financial Corporation, Honda, and Mercedes-Benz.

7. Cincinnati, Ohio

  • Cost-of-Living Ratio: 40%
  • Median Base Salary: $57,179
  • Median Home Value: $143,400

Even though I’m a Michigan grad and therefore not supposed to like Ohio, I have a soft spot for Cincy. My favorite activity is wandering the scenic riverfront park and then having a picnic while I watch the boats sail past.

Procter & Gamble, the University of Cincinnati, and Kroger are major employers here.

6. St. Louis, Missouri

  • Cost-of-Living Ratio: 40%
  • Median Base Salary: $56,896
  • Median Home Value: $141,900

How aren’t more people flocking to St. Louis? This city’s got it going on.

Thanks to its large student population, it has a bumping nightlife and lots of nice cafes. Another highlight is the City Museum, which is basically a jungle gym for adults and kids.

Big industries include biotech and health care, and Boeing employs more than 15,000 people in the area.

5. Indianapolis, Indiana

  • Cost-of-Living Ratio: 43%
  • Median Base Salary: $56,000
  • Median Home Value: $130,200

My friend’s dad—a well-traveled person—calls Indianapolis his favorite city. Although I’ll never fully understand that, I can see why it’s appealing.

I lived in this affordable city during middle school, and it offers midwestern values, a healthy population of young people, quality sports teams, and a convenient location in the heart of the country.

Its major industries include health care, education, finance, and tourism.

4. Cleveland, Ohio

  • Cost-of-Living Ratio: 44%
  • Median Base Salary: $55,000
  • Median Home Value: $125,500

Downtown Cleveland is cool—and not just because it’s home to the Rock & Roll Hall of Fame. There’s a fun and active culture about the city, as evidenced by the many restaurants on the walkable East 4th Street.

Cleveland’s major industries are advanced manufacturing and health care.

3. Pittsburgh, Pennsylvania

  • Cost-of-Living Ratio: 45%
  • Median Base Salary: $56,896
  • Median Home Value: $126,700

With American Eagle, GNC, and Dick’s Sporting Goods headquartered in the area, in addition to several manufacturing and steel companies, incomes are good in Pittsburgh.

So if you want to be in the Northeast and close to major cities such as Philadelphia, New York, Boston, and Washington, DC, Pittsburgh makes an excellent home base.

2. Memphis, Tennessee

  • Cost-of-Living Ratio: 46%
  • Median Base Salary: $52,000
  • Median Home Value: $112,100

The birthplace of rock ’n’ roll has a lot going for it: a vibrant culture, mild winters, and excellent southern cooking. With a median home value of just over $110K—the lowest on this list—it’s clear you can get a lot for your money here.

Major employers include FedEx, International Paper, AutoZone, and St. Jude’s Children’s Research Hospital.

1. Detroit, Michigan

  • Cost-of-Living Ratio: 50%
  • Median Base Salary: $61,500
  • Median Home Value: $123,100

Detroit is on the upswing. I went to college nearby, and I know many people who moved back and are passionate about the city’s growth and success.

Quicken Loans and General Motors have headquarters here, and other major industries with employment potential include health care, finance, and government.

How Major Expenses and Income Affect the Cost of Living

Although I’ve written before about the most affordable cities in the US, Glassdoor’s report provides a new angle on the issue by including income—because the combination of low-cost homes and decent incomes makes a compelling argument for midsize cities. Even if you take steps to drastically reduce your cost-of-living expenses, that pairing is hard to beat.

Still not convinced? The numbers might change your mind.

Let’s say you lived in San Francisco, where the median home value is $806,600, and saved 10% of your $88,000 median base salary. It would take you over 18 years to save a 20% down payment. If you lived in Detroit and saved 10% of your $61,500 income, it would take you only four to save for a 20% down payment on a $123,100 house. So the next time a flashy city calls, think about that.

If you’re ready to pack up and move to one of these affordable cities, it’s a good idea to check out mortgage loan offerings in the area first. Affordable housing is great, but it’s even better when paired with a loan that has a competitive APR. Check out Credit.com’s Mortgage Loan Center to learn more about available loan offerings.

Image: istock

The post 10 Cities Where Your Paycheck Goes the Furthest appeared first on Credit.com.

9 State Parks Perfect for Camping on a Budget This Summer

Enjoy s'mores and beautiful scenery without worrying about your budget by camping in these gorgeous state parks.

A warm bonfire, toasty s’mores, a starry sky. Isn’t it time you went camping? With student loan and credit card debt weighing many of us down, it might seem like a vacation is out of reach. But camping is the perfect way to adventure on a budget. Instead of sticking to national parks, though, consider camping in state parks. There are more than 10,000, and they are often cheaper and less crowded than national parks.

Yellowstone, for example, costs $30 for a seven-day pass. But Sinks Canyon State Park, just a few hours away from Yellowstone, is free. Here are nine incredible state parks where the camping won’t disappoint — or hurt your wallet.

1. Fall Creek Falls State Park in Tennessee

Fall Creek Falls, the largest and most-visited state park in Tennessee, sprawls over more than 26,000 acres. Its eponymous falls tumble down from 256 feet above — certainly a sight to see! It offers a plethora of activities including hiking, swimming, golfing and boating. You can even try your hand at a treetop obstacle park that includes bridges, swings and zip lines high in the forest’s canopy.

Entrance Fee: Free
Tent Camping Cost: $13.75 to $31.25 per night

2. Sinks Canyon State Park in Wyoming

Get close to Yellowstone without the costs or crowds at Sinks Canyon in Wyoming. According to the website, it gets its name from “a large cavern where the rushing river flows into cracks and crevices in the cavern floor and disappears underground.” Whether you enjoy hiking to waterfalls, swimming in the river or fishing for trout, you’ll find it here at an affordable nightly rate.

Entrance Fee: Free
Tent Camping Cost: $6 per night for residents; $11 per night for nonresidents

3. Pfeiffer Big Sur State Park in California

Located along the pristine Big Sur River and surrounded by redwoods, this state park on California’s central coast is a great place to escape the hustle and bustle. If you’re looking to completely unplug, you’re in luck — your phone probably won’t work here. You’ll have to settle for swimming, hiking and relaxing. Keep in mind, there’s no beach access at this park. For that, you’ll have to travel down the road.

Entrance Fee: $10 per car
Tent Camping Cost: $35 per night

4. Boston Harbor Islands State Park in Massachusetts

Have only a short time to get away? As the name suggests, this state park is composed of a series of islands between 20 and 70 minutes by ferry from Boston. Enjoy hiking, birding and great views of the city’s skyline. With only 33 campsites spread across three islands, making a reservation is crucial. (Before booking any reservation on your card, it’s always wise to check your credit score. You can check your credit score for free at Credit.com)

Entrance Fee: Free, but it’s $17 per adult for round-trip ferry transportation
Tent Camping Cost: $8 per night for residents; $10 for nonresidents

5. Tettegouche State Park in Minnesota

Want to go hiking to a waterfall, fishing or rock climbing? You’ll find an abundance of outdoor activities at Tettegouche, about an hour north of Duluth. Prefer water sports? It has five kayak-in camping sites, which are accessible only by paddling. How cool is that?

Entrance Fee: $5 per car
Tent Camping Cost: $15 to $23 per night

6. Harris Beach State Park in Oregon

Oregon’s rocky coast is one of the most beautiful places in the world. At this state park, you’ll be able to see the beauty up close. Plus, from the sandy beaches and rocky cliffs, you might spot a sea lion, a puffin or a whale. If you prefer not to camp in a tent, the park also offers six yurts at $43 per night.

Entrance Fee: Free
Tent Camping Cost: $20 per night

7. Rainbow Springs State Park in Florida

Florida’s natural springs should be on everyone’s bucket list. These cold, crystal-clear bodies of water make camping in Florida’s heat bearable. When picking a campsite, you should probably make sure you’re near one of them. At Rainbow Springs, you can swim in the refreshing water or enjoy it via kayak, canoe or inner tube.

Entrance Fee: $2 per person
Tent Camping Cost: $30 per night

8. Baxter State Park in Maine

Mount Katahdin is not only the tallest peak in Maine but also the northernmost point of the famed Appalachian Trail. It’s located at the southern end of this 200,000-acre state park. In addition to hiking the mountain and its environs, you can fish, bike, climb, paddle and hunt. This park is understandably popular, so if you’re going during the summer months, be sure to make a reservation.

Entrance Fee: $15 per car
Tent Camping Cost: $21 to $32 per night

9. City of Rocks State Park in New Mexico

If you’re looking for an otherworldly state park to explore, check out City of Rocks in New Mexico. Here, you’ll find a “city” of volcanic formations scattered in the desert. Don’t worry — it’s not just rocks. You also can enjoy camping, mountain biking, wildlife viewing and excellent stargazing.

Entrance Fee: $5 per car
Tent Camping Cost: $10 per night

Traveling on the cheap is no easy feat, but by comparison shopping for plane tickets, rental cars and, yes, even campsites you’ll be able to cut costs and still have a wonderful time. If you’re ready to explore the great outdoors, there’s no better time than the months that lie ahead. So grab your friends and some marshmallows and get going! Plus, continue the outdoor journey by checking off some of the 37 national parks to see before you die.

Image: pixdeluxe

The post 9 State Parks Perfect for Camping on a Budget This Summer appeared first on Credit.com.