How High Earners Not Rich Yet's (HENRY's) Can Secure Homes with Innovative Mortgage Solutions

India Kinchelow

3 min read

High Earners Not Rich Yet's, or HENRY's, represent a unique demographic group characterized by impressive income levels that often outshine their wealth status. As these millennials navigate the path towards financial affluence, numerous challenges arise that make it increasingly difficult for them to ascend the wealth ladder, particularly in terms of achieving home ownership in markets as demanding as California.

In the Golden State, where homes with seven-figure price tags are not uncommon even for the average home in some cities, the typical down payment can easily surpass the savings capacity of many HENRY's. While these individuals earn enough to comfortably handle monthly mortgage payments, they often find themselves lacking the substantial savings needed to make a sizable down payment, making homeownership feel frustratingly out of reach.

The High Earner Not Rich Yet Conundrum

The core challenge for HENRY's in California lies in striking a balance between their high incomes, living a luxurious lifestyle and their ability to accumulate savings.

Why is this the case? There are at least 4 primary culprits:

1. High Living Costs: California's cost of living is notoriously high, from soaring rent prices to exorbitant healthcare expenses. HENRY's often allocate a significant portion of their income to cover these basic living costs, leaving them with limited room for substantial savings.

2. Tax Implications: HENRY's are more likely to be subject to higher tax obligations due to their elevated incomes. While this is a testament to their financial success, it also means that a considerable portion of their earnings goes towards taxes, further diminishing their ability to save for a down payment.

3. Student Loan Debt: Many HENRY's in California are burdened with significant student loan debt, stemming from their pursuit of higher education. Servicing these loans can be a substantial financial obligation, leaving little leftover for savings.

4. Limited Access to Down Payment Assistance Programs: Ironically, HENRY's often earn too much to qualify for down payment assistance programs, which are typically designed for lower-income buyers. This leaves them without the financial support that could make homeownership more attainable.

Creating Opportunities for HENRY's

To bridge this gap and empower HENRY's to enter the California housing market, more lenders need to develop innovative programs tailored to their unique financial situations.

Here are some key strategies that could help:

1. Lower Down Payment Options: Lenders could explore the possibility of offering lower down payment options, recognizing that HENRY's have the financial capacity to make larger monthly mortgage payments. These programs would enable them to enter the housing market with a more manageable initial financial commitment.

2. Flexible Underwriting Guidelines. Lenders who finance homes over the Conforming loan limit set by Fannie Mae, often have rigid guidelines that call for additional savings (referred to as reserves) beyond the large down payment required to purchase the home. Depending on the lender, this could mean needing an extra $100,000 or more in addition to the 10-20% down payment of the home.

3. Gifts. Unlike Conforming loans where borrowers can receive a gift from family members or other approved sources, many require all funds to come from the borrower or limited seller contributions. Lenders can treat Jumbo loans like Conforming loans and allow the same gifting privilege so HENRY’s can supplement the purchase requirements with help from their family.

Lenders who provide these tailored benefits can effectively cater to the unique requirements of HENRY's, acknowledging their substantial earning potential while proactively addressing the constraints posed by their limited savings capacity. In doing so, they play a pivotal role in unlocking the doors to homeownership for a demographic that is deeply committed to realizing the California dream but often confronts formidable financial barriers on their path to achieving it.

India Kinchelow, widely recognized as "The Queen of Jumbos," serves as a licensed mortgage professional at NuVision Federal Credit Union. NuVision Federal Credit Union stands as a preeminent authority in the realm of Jumbo lending, distinguished by its remarkably flexible underwriting standards and competitive pricing. For personalized assistance and a no-obligation credit quote, please do not hesitate to reach out. Your homeownership aspirations are within reach, and we are here to guide you every step of the way.