- Real Estate
Brittany Anas Brittany Anas Brittany Anas is a former newspaper reporter (The Denver Post, Boulder Daily Camera) turned freelance writer. Before she struck out on her own, she covered just about every beat — from higher education to crime. Now she writes about travel and lifestyle topics for Men’s Journal, Forbes, Simplemost, Shondaland, Livability, Hearst newspapers, TripSavvy and more. In her free time, she coaches basketball, crashes pools, and loves hanging out with her rude-but-adorable Boston Terrier that never got the memo the breed is nicknamed "America’s gentleman."
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When it comes to saving for a down payment on a home, there are seemingly endless hurdles: Student loan debt. High rent costs. Being single and paying the bills all on your own. In fact, the whole process can feel so overwhelming that 27 percent of millennials don’t think they’ll ever be able to save enough cash for a down payment, according to a Bankrate study.
So when a peer is able to buy a home—say, a co-worker or a friend who you suspect is in a similar income bracket as yourself—you may be curious as to how the heck they did it. Yet talking openly about money (and how people are able to afford expensive purchases) is one of those topics that can seem uncomfortable, and even intrusive, to bring up. But should it be off limits? Couldn’t being open how you went about saving for a home potentially eliminate some of the barriers for others? In some scenarios, absolutely, experts say.
“On the advantages side, being open about how you bought a house can mean sharing helpful information, such as letting someone know about a first-time home buyer program you used,” says Amanda Clayman, a financial therapist and Prudential’s financial wellness advocate.
Sharing how you saved for a home may provide encouragement to someone and demystify the process along the way, she explains.
Here’s what’s often at play behind the scenes in the home-buying process, plus some tips for how to talk openly about affording a home.
So, how do people save for their first homes?
How much you’d need to put down a home will vary greatly depending on your loan and where you are in the country. But here’s what to know: The median home value in the United States hovers around $250,000, according to Zillow. First-time buyers on average put down 6.7 percent for a down payment, according to the National Association of Realtors. So the math shakes out to buyers being able to put down roughly $17,000 for an average-priced home, but it’s a whole lot more if you’re in a hot real estate market.
How exactly are your peers buying their homes? If you’re not comfortable broaching the subject with others, here’s some context that might answer a few questions:
- Generational wealth is giving a lot of first-time homebuyers a leg up. Twelve percent of homebuyers (and 28 percent of buyers under age 28) rely on a financial gift from friends or family to help them with their downpayment, according to a report from the National Association of Realtors.
- First-time homebuyers made up 83 percent of FHA loans, which have more lax credit requirements and allow you to put down just 3.5 percent (or a little under $9,000 for the average house).
- There are more than 2,500 down payment assistance programs available, according to The Mortgage Reports. Some are from non-profit organizations, but the majority of them come from state and area housing finance agencies. Mortgage professionals can help you find ones for which you’ll qualify.
Holden Lewis, a home and mortgage expert at NerdWallet, points out that if you buy a home with a gift of family money, it could assure your less privileged friends that it’s not their fault that they couldn’t afford a home as early in life as you did. On the other hand, that knowledge won’t help them buy a home.
“If you don’t want to tell your less-privileged friends about the financial help you got, ask yourself why you want to keep your good fortune private,” Lewis says. “What assumptions are you operating under? Maybe you’re unaware of the depth of economic inequality among your friend circle. It might help you become a kinder, more humble person if you acknowledge that you got a boost in life that other people don’t have access to.”
How to talk openly about saving for a down payment
When I was in my 20s, I was working as a reporter in Boulder, Colo., (a pricey place to be) on a $38,000 salary. It was a huge mystery to me when I learned my co-workers were buying property or hosting holiday parties in their spacious homes—and here I was budgeting my oil changes for the months that we got three paychecks instead of the usual two checks.
I signed up for a first-time homebuyer class, ran my numbers on a worksheet, and confirmed that it didn’t matter how much I brown bagged my lunch or went without Netflix, saving a down payment on my newspaper salary alone wasn’t going to cut it. (Since then, I’ve been open about how I bartended for five years to shore up a 20 percent down payment—yet I recognize my privilege in being able to work two jobs). I also wished I were more savvy when it came to first-time homebuyer programs.
However, there could be some drawbacks when talking about how you were able to afford your down payment, Clayman says.
“If a family member helped you with a down payment, how might someone feel about that information if they don’t have the option of family support?” she reasons. If you were able to save because you have a higher salary or no student loans, would the person you’re talking to feel encouraged by knowing that, or discouraged?
To help navigate the conversation, Clayman has tips for being open about how you were able to afford a home:
- Make sure the person you’re sharing with really wants to know about your experience. Don’t give any unsolicited advice. Ask yourself, “Am I sharing this information to be of service, or am I maybe just seeking admiration or praise for my own achievement?” Float an opening to the topic and see if they respond, such as, “I found saving up for a down payment and buying a home to be a real learning process. I’m happy to talk about it if you’re curious about any part.” This helps you share information that a person wants to receive.
- Attempt to understand before you attempt to inform. Their situation may be similar or different from yours in ways that you don’t know. Before you blanket them with what worked for you, find out where they’re feeling challenged and what’s working well for them. Start with something basic, like, “How’s the process been going for you so far?” and ask general, non-blaming questions like, “What gets in the way when you try to [XYZ]?”
- Share what worked for you, and remember that it may not work for everyone. If you encountered a similar challenge to what they’re going through, offer up what helped you get through it. For example, if someone mentions that they feel they’re taking two steps forward, one step back, instead of saying, “What you should do is…,” stick to an “I statement” that addresses their difficulty:“I found it helpful to have a separate emergency fund and down payment fund, because when I just kept it all lumped together as ‘savings,’ I felt like every time I dipped into it that I was losing progress toward my goal.”
- Respect boundaries. One helpful thing to keep in mind is that each of us is the expert in our own experience. So even if you’ve bought a home and the person you’re speaking with hasn’t, you are the expert in your experience that got you to homeownership, and you need to respect that the other person will find their own way there. Listen for cues that you need to take a step back in the conversation. The other person may be saying things like, “Well, that would work for me BUT” or “except” or “my situation is different because…” These words and phrases are a clear indication that the person is not picking up what you’re laying down. Your job isn’t to solve the problem of their homeownership—your job is to keep your friend. So respect the cues they’re giving you, trust them to figure out what lies in their own right path. A simple, “Yes, I get it, it’s a huge challenge, but I know you’ll get there!” is a great way to wrap it up, and then change the topic.
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