I saw a report out today that said that while Millennials are the slowest generation at becoming first time buyers, that the ones who have bought have Buyer’s Remorse…

Now, the reason they have remorse isn’t what you’d think. 

They don’t regret buying at all.  Many of them regret not buying sooner!  They’re trying to get their friends to be liberated from their Rentals or “LRF” (living rent free) so they, too, can become homeowners.

What they’re regretting is… PUTTING 20% DOWN!!!

Yes! All that absurd advice they have gotten about saving up 20% to:

1 – Not Pay PMI

2 – “Get a better Mortgage”

3 – “Get a better Rate”

4 – “Do it the right way”

5 – “Don’t get more Debt”

NONE of those make sense because they fail to take into account the perspective of the buyer!  

It is GREAT getting sage advice from the elders who have NO concept of your unique financial situation.  If anyone is giving you financial advice and starts with “In my day”… {insert eyeroll emoji }

The main reason that 20% down doesn’t work for most first time buyers is that it is WAY too much cash to part with and still be stable in a new home. 

Besides the 20%, they have to come up with

1 – 2-3% more for their closings costs… yeah – forget about those?

2 – Movers aren’t cheap but worth not throwing out your back

3 – Replacing appliances budgets tends to go awry when you see that super cool feature that orders all your groceries for you but blows your budget and your food is not as cold as the 6 year old fridge you put in the garage.

4 – That foreclosure or short sale your dad insisted you buy – the “sensible choice” – needs a new electrical panel, has 2 roof leaks, you cannot live on carpet that has been wet/dry/wet/dry for who knows how long without developing mold, etc… Basically it is a money pit – and FAR FAR From Sensible

( Dear Dads… the most sensible choice financially is the smaller one, yes.. the lower priced one, yes… but NOT the fixer upper!  It is the MOVE IN READY house – no not the flip, the one that someone has loved and cared for and doesn’t need a damned thing!!  Stop pushing distressed sales – they’re never cheap and you didn’t raise your kid to do the work him/herself! )

Basically here goes…

These buyers become HOUSE RICH
…and CASH POOR. 

Their house is worth plenty – Congrats! – but at the expense of draining their savings – WHOOPS!

(stop buying foreclosures/fixers as first time homebuyers!)  

Most financial advisers would say to put 10% of the payment you make monthly away for maintenance.  So if your mortgage is $1000/mo, $100 per month for fixing things up.  You would probably get by with less if you bought a home warranty and didn’t have to stress.

But… then there’s the real Millennial issue… once all that money is stuck in the house, they’re stuck IN the house.  Yeah…the experiences over materialism generation is now not able to travel, try new wines, go to ax throwing bars, go to the newest pop-up restaurants etc… because now they’re home, with no savings, eating Ramen and recaulking their shower before it leaks again after watching Youtube tell them how to recaulk their tub. 

Let them keep their 20%… do the 3.5% FHA loan.  That’s what it is there for…get into the house and ENJOY IT! 

When you sell in 5-7 years (stop thinking your first house is a forever home), all the money you put into it will help you put 10% down on the next home…and 5-7 years after that, MAYBE 20% down!


This content is not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.