house

@mickchampa/Twenty20

For many millennials, the dream of owning a home is often put on hold for years. And it doesn’t have a dang thing to do with avocado toast.

A new survey from the National Association of Realtors and the nonprofit group American Student Assistance found that more and more millennials are missing out on having that proud title of “homeowner” due to the crushing amount of student loan debt many of them are saddled with. In fact, first-time homebuyers are often delayed by seven years due to their debt, according to the survey. Some other staggering (and sobering) statistics from the report include:

  • 83 percent of non-homeowners cite student loan debt as the factor delaying them from buying a home
  • 28 percent of homeowners say their student loan debt is impacting their ability to sell their existing home and move to a different home
  • 27 percent of recent homebuyers and 40 percent of first-time homebuyers have student loan debt, with the typical amount being $25,000

And, it turns out, debt is even putting a damper on some pretty big dreams. The survey found that over half of respondents believe they are delayed in continuing their education or starting a family due to student loan debt, and 41 percent would like to get married, but are delaying their nuptials due to that debt.

Don’t Deter Your Dreams Due to Debt

Millennials, don’t delete that Pinterest board dubbed “Dream Homes” just yet.

Greg McBride, chief financial analyst at Bankrate, recommends not obsessing about paying off student loan debt to the point in which you’re putting off other higher financial priorities. He says you should prioritize saving for retirement, emergencies and a down payment for a home.

“Federal student loans are low, fixed rate loans that offer long repayment periods and flexibility that no other form of borrowing has,” McBride says. “Deferment, forbearance, income based repayment, and in some cases, debt forgiveness. What’s the hurry to pay that off?”

While your student loan debt shouldn’t put that big of a dent in the amount you’re saving for a down payment, it might mean you trim more from fun expenses, like entertainment, dining out, and travel, to get it paid down faster. But hitting pause on other financial priorities is a money misstep—and one that you could end up regretting when you’re 50 years old and still dealing with cringe-worthy Craigslist roomies. *shudder*

So, what’s a good plan? Don’t miss those debt payments, and don’t skimp on saving. Before you even begin budgeting out flexible expenses, figure out how much you owe for your monthly student loan debt payment, and then figure out how much you’re comfortable saving for a down payment.

A good, monthly savings goal for that dream house is to subtract your current rent from your estimated mortgage payment (including principal, interest, property tax, homeowner insurance and mortgage insurance), and save the difference, Bankrate recommends.

Let’s say the home you want to buy is $255,600 (the current average home value according to the National Association of Realtors). Once you crunch the numbers (total loan, interest rate and mortgage term in years), you’ll find that your total mortgage loan is $204,480, with an estimated monthly mortgage payment of about $980, before property taxes. That’s with a 20-percent down payment of $51,120 and the latest, average 30-year fixed mortgage rate of 4.04 percent.

If you calculate in your property taxes (national average for 2016 was $3,296 per year, or about $275 per month, but be sure to check how much property taxes are in your state), and you’re currently paying $700 in month for rent, then you should be aiming to save about $555 per month toward your down payment ($280 toward your mortgage and $275 toward your monthly taxes).

Here’s a calculator you can use right now to do the monthly mortgage calculations after the 20-percent down payment (sans property tax) for your dream home:

Doesn’t sound too bad when you break it down like that, does it? And that’s an aggressive goal; if you need to scale back, especially if you’re on an entry level salary in a rising rent city, that’s totally OK. What is important, though, is that you start saving. You can even invest a bit with the intention on using those earnings for a down payment.

One tool that I like is Ellevest, an investing platform that has saving for a home down payment as a financial goal target option. It will also create a unique investment portfolio designed to help you reach that goal, based on your current financial situation.

After you factor in all your financial priorities—including paying off your student loan debt, saving for a down payment, having an emergency fund and contributing to a retirement fund—then you can budget out the rest of your flexible expenses. Feeling too pinched? Consider taking on a side hustle you actually enjoy doing, downgrading to a non-luxury apartment, taking on another roomie or even packing lunch more often.

There’s no doubt that student loan debt squeezes you, and while I believe systematic improvements definitely need to be made in helping millennials manage that crazy amount of debt, you shouldn’t have to sacrifice your savings goals. Striking a balance between paying down debt and saving for a down payment will not be easy; it will test your self-discipline and your willingness to sacrifice, but coming up with a plan to slowly chip away at both is a good starting point.

And, if you’re graduating with debt along with that pricey piece of paper, don’t forget the gift that graduating (hopefully) gave you!

“Despite the gnashing of teeth over millennials delaying homeownership due to student loan debt, that student loan debt provided the education that generates higher income and greater employability,” McBride says. “When millennials do buy, they’ll buy bigger, with many skipping right over the starter home.”

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