As marketers, we tend to categorize consumers into large groups and draw conclusions about how they might behave in the future based on how they have behaved in the past. As a Realtor, I have to pay attention to the buying and selling habits of the consumers I serve, so I do keep up with what Generations X and Y are doing, where the Boomers are going and how everyone is buying and selling real estate. While recognizing patterns and trends is important, many years in the real estate business have taught me that you can never generalize. People are individuals and, whether buying or selling, everybody has their own idea. That's a good thing! Today more than 60% of home purchases are being made by Gen X and Gen Y buyers. That makes perfect sense when you consider who these people are. Generation X are those who were born between roughly 1960 and 1980. They would be somewhere between 35 and 55 years old, an age when people usually buy their second and/or third home. Generation Y is younger, born roughly between 1980 and 2000, aged 25 - 35. These are your first time buyers. According to the National Association of REALTORS, Generation Y makes up 31% of home buyers today, while Generation X accounts for 30% - so the two groups are almost equal. They are similar in a number of ways, not the least of which is debt. Both groups tend to be burdened with financial obligations that make it difficult to save for a down payment or qualify for a large mortgage. By far, the biggest debt issue is student loans - more a factor for Gen Y than X, but significant for both groups. Outstanding student loans total more than $1 Trillion today. The average loan balance is about $25,000 with about 15% of loans being more than $50,000. 40% of households headed by persons 35 years old or younger include some form of student debt. Student loans are neither a red flag nor kick-out factor when applying for a mortgage, but they do count as regular debt. Most lenders want to see that your total debt payments - including payments on your anticipated mortgage - don't exceed 40% of your gross monthly income, before taxes. That 40% is a bit fuzzy though, and there are programs with looser requirements that may be appropriate for some buyers. Consider a young, recently married couple, out of school half a dozen years buying their first home. If both parties have average student debt, that is a big bite out of their buying capability! Again, the rules are not hard and fast, and there is often a way around this seeming stumbling block. For example, FHA lenders will sometimes exclude student loan debt that is deferred for at least 12 months after the anticipated closing date. As you can tell, no matter how black-and-white the guidelines seem, qualifying for a mortgage is rarely a pass/fail situation. The right mortgage person, with solid up-to-date knowledge and a creative passion for making things work, can often find a way to get a tight applicant through. Whether the problem is a student loan, credit card debt, a big car payment or something worse, like a bankruptcy or foreclosure, the right mortgage rep can usually find a way to make the purchase happen or map out a plan to get the borrower to that point that their dream of home ownership can become a reality. The Vincent Group at GreatNest has been working closely with the best mortgage reps in the area for years. We have several we recommend to our buyer clients and consider their initial meeting to be an essential step in the home search and acquisition process. If you're interested in learning what you might qualify for in today's improving real estate market or how to go about solving your own credit and debt problems, please contact us. We'll help you choose the right mortgage rep and work with you to map out a plan to get into your dream home. As always we can be reached at 336-790-5210.
