American homeowners are finding it difficult to pay off their homes, and as a result, they wish they would have saved up more money before signing on the dotted line.
Of those surveyed, more than half (69%) say they should have saved more money for their down payment. On top of that, 52% of homeowners say their monthly mortgage payment is too high, 29% say owning a home stresses them out, 26% feel that it's a burden to own a home and just over 40% say they weren't aware of all of their mortgage options.
Despite feeling stressed and regretting their approach to home buying, a majority of homeowners (59%) still view homeownership as a big part of the American dream.
In a recent home ownership survey, Bankrate found similar results. While 79% of Americans view owning a home as "a hallmark of achieving the American dream," 44% of homeowners said they had regrets about their home purchase.
Homeownership doesn't appear to be getting any easier —or more affordable — for prospective buyers, either. From 2017 to 2018, the median home value rose by 6%. While that's good news for homeowners, it's not so great for buyers, since down payments and monthly mortgage costs will inevitably be higher, home co-investment company Unison found in its 2019 Home Affordability Report.
Unison's report also found that it now takes more than 25 years to save up for a 20% down payment on a median income in major U.S. cities, such as New York City, Los Angeles and San Diego. Nationwide, it takes about 14 years to save up for a 20% down payment if you earn a median income. As a result, potential homeowners are waiting to buy.
"The way things are going, an entire generation of Americans may be approaching retirement before they can securely own a home or be forced to take on more risk than they can reasonably afford in order to realize their dream of homeownership," Unison CEO Thomas Sponholtz said in the report. "This is a societal and economic problem that impacts all income levels."
In the U.S., the waiting game is especially real for young people with student loans. In fact, 48% of undergraduates with student debt plan to put off buying a home, a recent survey from real estate site Clever found. On average, they expect to push back home ownership by about seven years.
At the same time as housing prices are on the rise, U.S. worker's income has remained more or less the same. In the last 40 years, American's paychecks may have gotten bigger, but their spending power has barely budged, reports the Pew Research Center. Couple that with the rising costs of college tuition (and associated interest rates), and it's no wonder graduates are finding it extremely challenging to pay off debt and buy a home.
It's important to put together a solid strategy for saving for a down payment, so you don't end up like the other 69%.
First, figure out how much home you can afford. Since 1981, the government has said that people should not be spending more than 30% of your gross monthly income on housing. Your monthly mortgage payments will be determined by the cost of the home and the size of your down payment. The smaller the down payment, the larger your mortgage and interest rates will be.
Self-made millionaire and financial adviser David Bach tells CNBC Make It that he recommends having a down payment of at least 10%. Although, ideally you want to have 20% ready to go when applying for a mortgage, he says.
You should also take a look at any extra homeownership costs, including mortgage insurance, taxes, homeowners insurance, maintenance and any renovations you might need to make. If you include these costs when buying a home, you'll be a step closer to avoiding the No. 1 mistake more than 60% of millennial homeowners regret making, which is to "underestimate the hidden costs associated" with buying, owning and maintaining a home.
Depending on where you want to live, the amount of time it will take to save for a down payment will vary. To get you started, here's how long it would take to save to buy a home on an average income in 10 major U.S. cities.
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