A recent survey of prospective homebuyers noted many people - including younger adults - are taking the financial commitment quite seriously, and preparing accordingly.
Wells Fargo's "How America Views Homeownership" report revealed more than two-thirds - 68 percent - of respondents think now is a good time to purchase a home. But almost all prospective buyers know it's not worth doing so without first getting their finances in order and making sure they understand the process as well as possible. Being prepared to own - not just to buy - is a greater priority than it was in the past. That trend is perhaps indicative of the lessons learned from the recession and housing market downturn.
What buyers know, what they need to learn
Eighty-two percent of survey participants said they have an understanding of how to manage personal finances in preparation for a home purchase, though some of the answers related to that process revealed that's not entirely true. For example, 30 percent of respondents mistakenly believe only high-income individuals can obtain a mortgage. Lending standards have gotten tighter since the recession and the housing market's downturn, but qualification is based primarily on a borrower's debt-to-income ratio and ability to repay the loan, as opposed to income alone. The loan approval process is still conducted on a case-by-case basis, with risk assessments focusing on a borrower's credit history and the terms of the mortgage, rather than simply how much they earn.
The notion that younger generations don't view homeownership as a worthy goal proved untrue in the study, with 95 percent of respondents reporting it was an achievement they value and strive for. Another perception seemed to ring true, though: Younger prospective buyers do more online research and tend to ask more questions during the process than their older predecessors, according to the survey. Misconceptions regarding the minimum down payment qualifications and credit score standards remain, but overall, it seems as if younger adults are making sincere efforts not to approach the homebuying process without first arming themselves with as much information as possible.
"It is important for prospective homebuyers to feel empowered to ask lenders and real estate agents questions about available options, such as down payment assistance or FHA loan programs or VA loans for veterans," Codel said. "Ninety-five percent of survey respondents said they want to own a home if they don't already. Informing prospective homebuyers about their options is the first step toward helping them realize their goals."
Savings and demand stats
Nearly one-third - 63 percent - of the more than 2,000 adults surveyed have established a savings fund for a down payment on a home. Meanwhile, more than half of the respondents between the ages of 18 and 34 indicated they had begun saving for a new home purchase, though that same age group also cited a lack of funds as the most significant impediment on their path toward homeownership.
Perhaps most reassuringly, the survey dispelled most notions that homebuying demand is sagging. Instead, it reiterated the need for more accurate information to be disseminated among the buying population. Certain elements of the mortgage application process and the steps for buying the home still cause confusion, but the desire to understand these processes is very much alive. There are many Americans who still view homeownership as the ultimate investment, but too many of them remain ill-equipped to achieve those goals. They're willing to seek out the information and take the steps necessary, increasing the national homeowning rate in the process, but it may yet take some time.