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Homebuyers with Student Loan Debt Are More Likely to Purchase a Fixer-Upper

Student loan debt can have a major impact on your finances, even years after you’ve graduated. It can dictate how much you’re reasonably able to save and whether you’re able to buy a home.

As it turns out, student loan debt can also influence the type of home you buy. New LendingTree research shows an overwhelming majority of homebuyers with student loan debt would consider purchasing a fixer-upper. These homes typically have lower price points when compared to similar properties that are move-in ready.

We surveyed homebuyers ages 22 and older to gather their attitudes about fixer-uppers and home improvement projects, as well as gauged homeowners’ feelings about their current homes. Keep reading for a deeper look at the results.

Key findings

More than 4 in 5 homebuyers (88%) with student loan debt are likely to consider a fixer-upper.

Buyers paying off a student loan balance are more likely to consider purchasing a fixer-upper house than those with other kinds of debt, including personal loans (about 82%), auto loans (about 78%) and credit cards (about 78%). More than a quarter (28.35%) of homebuyers without debt don’t want to purchase a home that requires significant renovations or repairs.

Of the HGTV or DIY Network channel-watchers who tune in at least once a week, 81% would consider a fixer-upper.

Watching renovation shows seems to make people more likely to want to give it a try themselves. About two-thirds (66%) of people who never watch those channels also say they’re open to buying a fixer-upper home.

Nearly half (48%) of homeowners have made major home improvements within the last two years.

Millennial homeowners — those ages 22-37 — are most likely to have improved their home, at nearly 58%. Homeowners in the Silent Generation (age 73 and older) are least likely to have made improvements, with only about 39% reporting doing so in the last two years.

Almost a quarter (25%) of millennial homeowners paid for recent home improvements with savings.

Another 23% of millennials used credit cards to fund their renovations and yet another 23% of the age group used cash. Older generations are more likely to have used cash and savings for improvement projects.

Other takeaways

  • When asked which room in the house is most important, women are more likely to say the kitchen at about 47%, while men are most likely to favor the living or family room, at almost 35%. People who are married say the kitchen is most important (about 43%), while about 32% of those who have never been married prefer the living or family room.
  • Although the kitchen is the most important room across all age groups, many homeowners aren’t happy with theirs. Nearly 1 in 5 (about 19%) say it’s their least favorite room in the house. On the other hand, nearly half (about 47%) of homeowners say the living or family room is their favorite place.
  • The cost and size of a home are the two most important house hunting factors across all age groups. 71.4% of homebuyers care most about a home’s size while almost 70% care most about the cost.
  • Aside from cost and size, millennials care about the school zone a home is situated in (about 42%) and its proximity to their workplace (about 31%). Baby boomers prioritize having a garage (about 37%) and a house with few improvements needed (about 22%).

How to fund your home improvement projects

If you do decide to go the fixer-upper route, you’ll need to start thinking about how to pay for all the work your home will need. Before you turn to your credit cards to fund your upcoming home renovations, there are other options to consider that can potentially save you from expensive interest-related costs.

FHA 203(k) loan

The Federal Housing Administration offers two types of 203(k) loans for rehabbing an existing home: the limited 203(k) loan and standard 203(k) loan. These loans allow you to combine the cost of purchasing (or refinancing) a home with the cost of renovating that home.

The limited 203(k) loan is for minor renovations and repairs, and has maximum loan limit of $35,000. The standard 203(k) loan is for major remodeling projects and program participants must borrow at least $5,000 and hire a 203(k) consultant.

HomeStyle Renovation loan

Government-sponsored enterprise Fannie Mae offers the HomeStyle Renovation mortgage through approved lenders for borrowers who want to purchase a home or refinance an existing loan. A conventional loan and renovation loan are combined to finance the costs of the needed home improvements.

Read LendingTree’s explainer for more on how HomeStyle Renovation mortgages work.

Personal loan

For those who haven’t yet built a sizeable amount of equity, it might work in your favor to borrow an unsecured personal loan for your home renovations. Interest rates on personal loans can be significantly lower than credit card interest rates, especially if you have a solid credit history.

And if you plan on putting in some sweat equity of your own, here’s what you should keep in mind before starting DIY renovations.

Methodology

For this combined survey, LendingTree commissioned Qualtrics, an experience management firm, to collect responses from 2,095 Americans ages 22 and older who are considering purchasing a home within the next two years, as well as 2,002 Americans who currently own a home. The homebuyers survey was conducted online from March 11-15, 2019, and the homeowners survey was conducted online from March 22-27, 2019. The margin of error for both surveys is +/-2.4%.

Generations are defined by the following age groups:

  • Millennials: ages 22-37
  • Gen Xers: ages 38-53
  • Baby Boomers: ages 54-72
  • Silent Generation: ages 73+
 

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