There’s no doubt that COVID-19 has significantly impacted how and where we live. In the early days of the pandemic, a significant migration of people leaving cities and moving to the suburbs occurred as working from home became the norm. In addition, with many people losing jobs and young people unable to land well-paying entry-level positions, a trend in multi-generational housing also emerged. In 2016, a study conducted by Pew Research showed that 20% of the U.S. population lived in multi-generational homes. This cultural shift is expected to continue to grow and reshape how we think about the word “home” in the future. As a result, the housing industry needs to be prepared to evolve with it, as does the mortgage industry.
A multi-generational household can be defined as having three or more generations under one roof, a skipped generation (grandparent and grandchild), or two or more adult generations. Multi-generational homes are increasing in popularity because of the current housing shortage and an affordability issue due to rising property values, to name a few of the contributing factors. In addition, according to a Pew Research study, by 2030, one in every five Americans will be over 65, and our nation will face a severe shortage in accessible and affordable housing to meet their needs.
The financial benefits of living together are crucial factors to consider when a homeowner decides who will be living in their home and the type of home to buy. The most desirable design for a multi-generational family is often a one-level, single-family home. However, increasing property values can make it difficult for one borrower to qualify for a mortgage, so having a co-borrower helps.
Older retired Americans can take advantage of this dynamic, and a bonus is that they get to spend more time with their families as they age. Also, their retirement plans are taking less of a hit because they aren’t the only person paying for housing costs. Due to the high cost of education and resulting student loan debt, many young adults are also becoming open to this situation. While many loan programs are designed to help first-time homebuyers get a mortgage, some homebuyers new to the market opt for co-living experiences with family members, at least for their first home.
When a person is applying for a mortgage with one or more family members, it can increase the amount they qualify for and expand the number of homes they can afford. Often homes that can accommodate multi-generational homebuyers need to be larger and have more features to allow for privacy and accessibility. Other benefits of multi-generational homes include only paying property taxes and insurance on one house, only maintaining and repairing one property, and so on. This leads to a tremendous amount of cost-savings for all family members involved.
While there are many programs for first-time homebuyers, applying with a co-borrower will allow both parties to purchase a home together with a more significant loan amount. Both parties would likely purchase the property as their principal residence.
A principal residence is a property that the borrower occupies as their primary residence.
Multi-generational housing would also allow families to save money on the rising costs of nursing homes and assisted care facilities. As people age, it can become difficult to live alone. Living in a multi-generational home may provide an added sense of security to older family members while providing a sense of relief to caretakers who are now close by should the need for extra care arise.
Many factors go into how and why you buy a home and a multi-generational home may work for your family. Discussing your situation with an experienced loan officer is always a wise decision to get the financial facts about homeownership.