Renters Report Future Home Buying Optimism, Financial Assistance Available to Population with Higher Homeownership Rates
Most renters expect to buy a home someday, but nearly half see the down payment as one of the biggest obstacles to getting a mortgage, according to data from Fannie Mae’s National Housing Survey®. We set out to better understand renters’ expectations and challenges, as well as the role of financial contributions from family in first-time home buying, specifically:
- Do current renters expect to own a home in their lifetimes, and what do they define as the greatest obstacles to obtaining homeownership?
- How common is it to get help from family for a down payment?
- Does financial help from family change whether and/or when someone buys their first home?
- Who is more or less likely to report having received family assistance?
- How do future expectations compare to past experiences?
The answers we found suggest that the majority of renters intend to own a home someday and that most see the upfront costs as the greatest impediment. Additionally, we found that family financial assistance does boost potential homebuyers’ prospects but is most available to populations with higher homeownership rates.1
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Do current renters expect to own a home in their lifetimes, and what do they define as the greatest obstacle to obtaining homeownership? Most renters expect to buy a home someday, but nearly half see the down payment as one of their biggest obstacles to getting a mortgage. How common is it to get help from family for a down payment? One-fifth of all current and previous owners report having received financial assistance from family when they bought their first home. Does financial help from family change whether and/or when someone buys their first home? Seventy-three percent of those who received family assistance say they still would have been able to buy a home without their family’s help, though perhaps not as quickly. This figure includes both the 34 percent who said the assistance had no effect on their home buying timeline, as well as the 39 percent who said they were able to buy a home sooner than they otherwise would have because of the family assistance they received. Who is more or less likely to report having received family assistance? Those who most often report having received financial assistance when purchasing a home tend to belong to groups with higher homeownership rates. Specifically, Hispanics and non-college graduates, whose homeownership rates tend to be lower than the general population’s,2 are less likely to say they received financial assistance when buying a home, even when controlling for other factors.3 How do future expectations compare to past experiences? Among renters, expectations for future family assistance with home buying (10 percent) are not as common as reports from current and previous owners who received family assistance in the past (20 percent). Minorities are hopeful they’ll be able to provide financial assistance to family but are no more likely to report providing financial assistance than the general population. |
Of course, family financial assistance can extend beyond the down payment. For example, assistance with education expenses can indirectly increase homeownership likelihood by increasing educational attainment, and therefore job and income prospects. Indeed, in a recent study sponsored by Fannie Mae, researchers at the University of Southern California found that parental income and wealth are highly correlated with their children’s college educational attainment.4
Although most people don’t have the benefit of family financial assistance to help them make a down payment on a home, there are some resources available to help potential homebuyers afford the upfront costs. For example, they may be able to take advantage of low down payment mortgages that require significantly less upfront than the traditional 20 percent, as well as programs offering grants towards down payment and closing costs. Our past research demonstrates that most people remain unaware of these types of programs and tend to overestimate the size of the down payment needed in order to buy a home.5
Sarah Shahdad
Market Insights Researcher
Economic & Strategic Research Group
September 28, 2017
The author thanks Pat Simmons, Dowell Myers, Steve Deggendorf, and Tom Seidenstein for valuable comments in the creation of this commentary. Of course, all errors and omissions remain the responsibility of the author.
Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic and Strategic Research (ESR) group included in this commentary should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
1 See also: Education and the Intergenerational Transmission of Homeownership; The "Bank of Mom and Dad" and Young-Adult Transitions into Homeownership
2 U.S. Census
3 See full study for complete methodology and results
4Education and the Intergenerational Transmission of Homeownership
5Survey Reveals Significant Gaps in Consumer Knowledge of the Requirements to Qualify for a Mortgage
Special Topic Summary – September 2017
Business Partners
Homebuyers, Owners, & Renters
- Educational Resources
- Credit Basics
- HomeView Homeownership Education Course
- HomePath - Search for Homes
- Make Your Rent Count