Today, let’s talk about “payment shock” and what it means for millennials. I see the issue all the time with first-time homebuyers in Virginia (Virginia Beach, Norfolk and Chesapeake).
First, what is payment shock? It’s when the amount of the proposed monthly mortgage payment is significantly higher than a rent payment — or no payment at all.
Common millennial example: a borrower has lived at his parents’ house rent-free for a while. That means a monthly mortgage will be a new situation and could lead to a payment shock.
A payment shock doesn’t mean the deal is dead. Rather, it means the borrower may need to have extra funds in reserve (ex: checking/saving account, IRA).
What does all of this mean for you?
Wall Street Journal announced this week that 2015 may be the year of growth for first-time home buyers. Why? A combination of job creation and easing of loan restrictions.
See the chart down below for more info.
So get ready for millennials in the housing market. And the payment shock they might bring with them.
You can always call me at 757-490-4726 or emailsrubin@tidewaterhomefunding.com if you have any questions or concerns.
Featured photo: Gratisogrsaphy