In our current economy it is no secret that many Millennials and Gen-zers are feeling discouraged about the current housing market. With high interest rates and housing costs, the task of buying a home is a daunting one. High rental costs make it difficult for renters to put money aside for a downpayment; add in closing costs and the expenses become astronomical. It is an unfortunate but common scenario younger generations run themselves through, automatically disqualifying themselves before even starting the process. It's a conversation I myself continuously have with friends, family and colleagues. It is also the situation I found my clients in a year ago.

Two weeks ago we closed on their first home.

Rewind to March 2024. A friend of mine in Loveland reached out to me expressing the desire to buy a home. Step one? I had him talk to my lender to get prequalified. This involves submitting pay stubs, W2s and bank statements to know what purchase you can afford. Unfortunately at this point in time him and his partner's credit scores were too low to qualify, but that didn't discourage us. With the help of our lender, we came up with a plan and enrolled them in a guided credit repair program to help them prioritize debts and increase their credit scores. By Summer of 2025 they their credits scores were up to 580 and we were able to get them prequalified. A common misconception first-time homebuyers have is that they need to have a perfect credit score to qualify for a mortgage, but the reality is FHA loans and other programs allow credit scores as low as 580— and even lower with larger down payments.

Early adulthood often comes with financial challenges that make it difficult to save for a down payment, however. Expenses like student loan payments, wedding costs with a long-term partner, or buying a car for a new job are just a few examples. These life events can discourage buyers from getting pre-qualified because they do not believe they can qualify if they have debt, but this is a false assumption. Lenders look at debt-to-income ratio (DTI), not just loan balances. Many buyers qualify even with student loans. Like many other millennials, these buyers had numerous debts (some even delinquent) but were still able go get pre-qualified and even pay off some of their student loans at closing with a credit.

There is a commonly used 20% rule when calculating an "appropriate" downpayment, which would tell you that in order to afford a $500,000 home, you would need at least $100,000 for a downpayment: a startling, intimidating number for most Americans. According to a survey published by Forbes in October of this year, the average savings for Americans under 35 is $5,400. For Americans 35-44 the average only goes up to $7,500.  The idea that you need a 20% down payment is a common misconception, however. While not required, putting down 20% on a conventional loan allows you to avoid paying for Private Mortgage Insurance (PMI). PMI is an extra monthly expense that protects the lender, not you, and is typically required when your equity is below 20%. The reality is any loan programs require as little as 3% down—and some even allow zero down for eligible buyers. In this scenario, my buyers had zero money for a downpayment but were were able to utilize a VA loan which allows veterans to finance 100% of the homes value. Although this can create additional VA funding fees, there are options to assume the fee as part of the loan or pay off with a credit. In this specific scenario, the buyers assumed the the VA funding fees into their mortgage which only added on an additional $63/month. If you do not qualify for a VA loan, there are other loan and downpayment assistance programs that will allow you to put little to nothing down on a home. Talking with a lender is the best option to create a tailored solution that best fits your goals.

Another hurdle was that they didn't have upfront cash for a downpayment or for closing costs. We were able to find them a VA program that allowed them to put zero-down and we negotiated $10,000 in seller credits to cover their closing costs and a 1:0 buydown. With all of this combined they were able to close on their dream home with no downpayment, little to no closing costs, and have monthly payment close to what they were already paying in rent! Before close we went over all their goals together. They wanted a home in a specific location that had a finished basement for entertaining, a seperate guest bedroom and bathroom for family or friends who visited but was still private enough for them and their guests, and a private backyard. They wanted their monthly payments to be below a certain amount, to buy a home without a downpayment, and to improve their finances. Not only did we accomplish their current goal of purchasing a home, but long-term making monthly payments on their mortgage will significantly increase their credit scores meaning in the long-term not only will they be able to refinance at a lower rate but additionally insurance costs such as home insurance and care insurance will go down