About 30 percent of millennial first time home buyers are pulling funds from their 401K, IRA, or borrowing against their retirement funds to afford a down payment, according to a new study.
Locally, experts said that trend is not surprising, given how expensive and competitive the market is. But pulling money from a retirement fund both jeopardizes a person's financial future and fails to take advantage of other options.
"We were set up to help first time home buyers of moderate or middle income," said Ralph Perrey, executive director of the Tennessee Housing Development Agency. "It often surprises people to know that moderate or middle income in Middle Tennessee could be a single person earning $90,000 a year and a family earning up to $105,000."
THDA offers several programs to help first time home buyers, including homebuyer education courses.
Nashville realtor Paul Sek said he recommends people take the time to set themselves up for success and consider what you can realistically afford.
"People have completely neglected the starter home and they want the dream home right off the bat," Sek said. "They don’t understand they’re still in their 20’s or 30’s and they think they should buy the $500,000 or $1 million home."
Sek said he also often sees family members, particularly parents, helping millennials with down payments through personal loans.
"I think the baby boomer generation understands and they want their children to have a home," Sek said. "They know what it takes and they’re proud of them for making that investment."
Sek said he advises anyone considering a home purchase to meet with several lenders, even before consulting a realtor, to learn more about your down payment options.