Millennial Home Buyer Tips
For those unaware, a millennial home buyer is defined as someone in the 18-35-year-old age bracket.
Millennials buying homes have not been as plentiful as other generations.
Millennial home buyers have not looked at purchasing real estate in the same fashion as other generations have.
With the recent real estate recession fresh in their mind, in addition to student loan debts, high unemployment, and tighter mortgage credit, millennials have not been as quick to jump on the homeownership train.
Millennials are in a unique position when it comes to home ownership. Most have heard stories of their grandparents and parents buying homes in their 20s and early 30s.
Yet as the millennials became adults, all they saw was struggle and frustration in the real estate market as the entire economy sunk into a recession. This has naturally turned many millennials off of the idea of buying a house. But it shouldn’t.
If you are in your 20s and 30s and have even considered buying a home, you can take advantage of record-low interest rates.
Even if you have just graduated with student loan debt and worry that there are no home-buying options for people in your situation, you may be wrong.
Real Estate Values Go Up and Down
The dream of homeownership for young adults may have hit a few speed bumps, but it is certainly not over.
While there was a seven-year time span from 2005-2012 where real estate values plummeted, this was just a blip on the homeownership radar screen.
Historically real estate is a long-term investment that has done very well for many people. Much like the great depression in the stock market of the late 1920s and early 1930s, real estate bounced back in a big way.
Look at what has happened to real estate values over the last five years! Many say millennials will never own homes, but that’s not the case.
Let’s look at what millennials buying homes should know.
Millennial Home Buyers Should Have a Long View on Owning a Home
One of the best tips for millennial home buyers is to have a long-term view of home ownership. There will always be ups and downs in the market.
Riding out the ups and downs should not be that difficult if you are in an excellent financial position and avoid home-buying mistakes.
While deciding between renting or buying right now may seem like a big dilemma, years down the road, you will probably be glad you chose the American dream of home ownership.
Things to Remember as a Millennial Home Buyer
Millennials buying homes should understand there are many critical things to having success. It is easy to make mistakes when you have never purchased a home before.
Let’s review some essential things for millennial home buyers to know.
Millennials Buying Homes Should Be Saving For A Down Payment
Having ample down payment monies is crucial for millennials buying their first home.
For most of us, purchasing our first home is often a long-term investment. With over 97% of millennials taking out mortgages as financing sources, it is critical to have a significant upfront down payment to lower the interest rate and expedite paying off your loan quicker.
As a thirty-seven-year real estate agent, I recommend trying to save twenty percent if possible. While you can certainly purchase with less, you’ll avoid paying private mortgage insurance, which can be expensive.
You’re not alone if you’ve been struggling with down payment money. Over 25 percent of millennial home buyers have gotten down payment assistance from a family member. Down payment gifts for millennials buying homes are not unusual at all.
The key is to have a financial plan to keep growing your savings. The average down payment for a first-time home buyer is 6 percent.
Paying Off Student Loans is Essential For Millennials Buying Homes
For millennial home buyers, the most significant obstacle is usually student loans. Over 44 million Americans are still struggling to pay off the debt of over $1.6 trillion. As of 2019, the average graduate has over $35,000 in student loan debt.
Student loan payments have increased, leaving many young adults unable to realize their dream of buying a home.
According to the National Association of Realtors (NAR), car loans and credit card debt were the most prominent factors influencing potential down payments – although consumer debt accumulated post-graduation came in as high as 37%!
Work on Your Credit Score
There are few things more vital when buying a home than improving your credit score. There is a minimum score to buy a home, but higher credit scores provide better mortgage terms.
With excellent credit, you can get the best mortgage interest rate. Millennial home buyers should focus on improving their credit standing before purchasing.
Go With The Right Mortgage Program
Understanding how to get a mortgage is perhaps one of the most vital tasks of a home buyer.
As a millennial buyer, there will be plenty of loan options. Your down payment will likely have a significant influence over which you choose. Many first-time home buyers programs cater to buyers with lower down payments.
One of the millennial buyers’ most popular mortgage programs is an FHA loan. A significant benefit is the low 3.5% down payment requirement.
Careful research should be done before committing to a mortgage as a millennial buyer.Click To TweetSeek Help From a Real Estate Professional
If you are in your 20s and are seriously considering buying a home, you have already come much further than many of your peers. This speaks to a level of maturity that will help you considerably in the home-buying process.
However, you are still limited in your understanding of the real estate buying process. You need to hire a great buyer’s real estate agent to get the desired results.
Choosing someone with a firm grasp of the local neighborhood, school systems, and demographics in the area you are looking at is essential.
Ensure you carefully interview the buyer’s agent before committing to work with them.
Realtors have years and sometimes decades of experience in this industry. This means they have a firm grasp on what to do and what not to do when buying a house.
They will also know what options are the best fit for your situation and will have a network they can tap into to find you the home you need.
While all this knowledge will cost a fee, it is usually more than worth getting access to this assistance. Buying a house without a Realtor can be a financial nightmare.
Realtors do so many things for their clients. Going without one isn’t the best decision.
Pick a Realtor You Can Trust
Pick an agent you can trust – Because you have never done this before, you will often be at the mercy of those more knowledgeable than you – namely your agent.
While you will have the final word, most of the information you get about the process will come from the Realtor. This is why it is essential to pick the one you can trust.
Savvy home buyers interview several agents before choosing which will represent them. This only makes sense.
The agent is working for you and should meet your criteria. Some first-time buyers choose to go with a family friend, or an agent recommended to them by someone they trust. Others pick one out of a Google search.
Whichever way you go, ask tough questions to verify that this person can do what you need to accomplish your goals.
Have they worked with other first-time buyers? Does the agent have several recent references that you can contact? How many buyers do the agent work for at a time?
You want someone active in the market who will have time for you.
Choosing the right real estate agent is one of many tips for first-time home buyers in this comprehensive article. Take the time to make a list of questions and then interview at least 3 different real estate agents before you decide on which one you want to work with.
In the end, this is your money, and you can spend it however you want. There is no reason to settle for less than the best, even if you are a first-time home buyer.
Consult With Elders and Mentors as a Millennial Home Buyer
Seek out older people that care about you for advice about buying a home. Whether these are your parents, grandparents, older friends, or even mentors you worked with in school or at the job, you can benefit from their experience.
They may have already bought a home or several, and they will have the experience to draw on and advice on where they went wrong and what they did right.
There is a steep learning curve to buying your first house, meaning you will need all the help you can get to get good results.
Another advantage to talking to these people is that some of them may offer to help you with your down payment. If this happens, it can be highly beneficial.
The higher the down payment you can come up with, the more favorable loan terms you can usually get. This can save you thousands – and even tens of thousands – of dollars over the life of the loan.
Your elders are also probably in a position to explain the significant tax advantages of home ownership. Anyone who has owned a home for an extended period of time can attest to some of the outstanding tax perks.
Whether deducting your mortgage interest every April, building equity with each mortgage payment, or not getting taxed on real estate capital gains profit, owning a home almost always wins financially over renting.
Identify Great Locations and Neighborhoods
One of the things I have noticed working as a Real Estate agent in Grafton, Massachusetts, is how some first-timers do not have a firm grasp on how much location and neighborhood affect value and the ease with which you can sell your property years down the road.
Millennials buying homes should understand there are not many factors that can influence the value of a home more than the location.
While you may fall in love with a particular home because of its attributes and characteristics, if it is located on a main road next to a gas station, you may have difficulty in the future selling it.
Quite a few first-time home buyers do not have a firm grasp on how to pick a neighborhood. This guide should give you a clear understanding of the importance of schools, crime rates, and nearby conveniences.
Understanding Immediate and Long-Term Costs is Crucial
When purchasing a home, millennial buyers should have an excellent grasp of all the costs.
Many fees can add up quickly, from applying for a mortgage, getting mortgage insurance, home inspection costs, hiring an attorney for contract review, and other optional expenses discussed in the above-mentioned article.
You should know all these costs and see if they apply to your home-buying situation.
These are just the costs and fees before you take ownership of your property.
There are also expenses associated with owning a home besides paying the mortgage. Many buyers do not budget properly for all the long-term expenditures they will be taking on and end up struggling for a while due to a lack of proper planning.
Decide on What Housing Choice Makes Sense
Deciding on what type of housing makes the most sense is essential for a millennial home buyer.
One of the decisions you will likely face as a potential property owner is whether a condo or a home is a better buying decision based on your current life circumstances and housing needs.
The decision to purchase a condo or townhouse vs. a single-family home is usually one of the top considerations for a millennial home buyer.
Do you travel a lot and don’t have time for property maintenance? Do you have kids who need a yard to play in? Are you likely to want a garden? Are you interested in perks like a pool or a gym you can’t reasonably afford?
When deciding if a home or condo makes more sense to purchase, these are the questions you should ask yourself. This is something that should be given careful consideration.
Millennial Home Buyers Need to Be Patient
Another excellent tip for millennial home buyers is to take your time. It takes a lot of courage to make this kind of decision. Once you have taken the leap and decided to buy a house, it can put the wind in your sails.
You are probably ready to complete your home-buying journey as soon as possible. But you need to slow down. You need to do your research, and you need to choose wisely.
Learning about the home-buying process will allow you to make knowledgeable decisions.
You can look at as many houses as you like and make offers on the ones you are interested in. You can even go through the negotiation process on several different houses without actually committing to buying on terms you are unhappy with.
You only hand over the money if you want to. And you should only do so for a house you are pleased with.
Additional Helpful Articles For Millennial Home Buyers
- The ultimate guide to buying your first home via Ryan Fitzgerald of Raleigh Realty.
- Seven questions to help you decide on renting or buying via US World News.
Use these additional home-buying articles to make a wise decision when purchasing a home. It is easy to make financial and emotional mistakes when you have never done something.
Fall back on the guidance of others, especially your real estate agent, if they have years of experience selling homes. Timeless advice will guide you through the home-buying process without a hitch. Best of luck!
About the author: The above Real Estate information on tips for millennial home buyers was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 37+ Years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.
I really appreciate your tip on being patient, especially since I am a very impatient person! My husband and I are in the middle of looking for a home to buy, but we haven’t found much yet. However, we’ll make sure to take a break every once in awhile and just do a little bit of research. Hopefully that will help us relax a bit as well!
You’re right in saying that a lot of struggles come from that improper planning you mentioned. With good planning, the many costs tied to owning a home shouldn’t come as a surprise. I’m thinking of buying a home soon, I’m doing my best to plan everything out. The first step for me is finding a realtor.
These are some great tips, and I appreciate your advice to consult older people with more experience when buying a home. My husband and I are going to be graduating soon, and we’d like to buy a home as our next step in life. It’s still a little ways off, but we’ll definitely start talking to those with more experience than us to start figuring it out. Thanks for the great post!
I like that you mentioned seeking out a referral for an agent if you are a first time buyer. You want to make sure you have someone representing you if you are unfamiliar with the process, but don’t just pick anyone. Make sure you can trust and rely on them.
Even if you are in your forties or fifties and have bought a house before I think it is a good idea to seek professional help when buying a house. If you are anything like me then you won’t know much if anything about the housing market where you are looking. That alone would put you at a serious disadvantage, but I think it is more about knowing what homes are available and having good connections. You will probably have an easier time finding a good house for you with the help of someone who already knows what is on the market.
I agree that you should decide what type of housing makes the most sense before you buy a home. I would imagine that deciding if you want new construction or an older home would be important too. My husband and I are looking for a new home so we’ll have to figure out what type of housing works best for us.
I’m glad you recommend getting a good Realtor as the very first tip! This is definitely a smart move when you’re purchasing a home at such a young age. Like you said, they’ll have a firm grasp on the do’s and don’t s of buying a house and can point you in the right direction.
I really like what was said about millennials in this article. I really can relate to a lot of these worries when it comes to home ownership. I really like the tip to seek help form a professional because if you rely on your own knowledge you miss out on a lot of information.
I agree that when planning on buying a house it’s always a good idea to seek professional help. I would want to hire someone who takes me seriously and has my best interests in mind, someone who know where the best options are, and that helps me choose the best property I can. I will make sure to remember the things you have said. Thank you for sharing.
I agree that it is wise to select a realtor who has multiple years of experience in a certain region because it demonstrates that they are familiar with the area. Hiring an experienced agent could be a good way to get access to the information that you need regarding the quality of neighborhood. Even if you have yet to have children it could still be beneficial to know about the school system so that you know if it would be a good place to raise your family.
The article makes a really good point about an agent’s network being a benefit. Let me explain what I’m thinking. I’ve heard the advice to get the loan before you look for houses. This way you know what your budget is. Then, you can go to the agent and they can use their network to find you the dream house that you can afford.
It’s good to know that while costs are a big speed bump for millennials buying a home, good interest rates are worth considering to pay it off in the end. It can be difficult to make a long term decision like that without know how things could change in the future. I think it is wise to have an agent help you see the market in the near and far future to make the right choice.
I think the article made a great point about how you should seek to understand the long term costs associated with owning a home. I like how it states that there are a lot of costs you might not understand at first, so understanding whether or not costs such as attorney fees or home inspection costs pertain to you seems to be really helpful. My wife and I are looking at moving into a new home, but we hadn’t really considered any costs other than how much we need for a down payment. Thanks for the tips!
I am going to be graduating college soon and I want to buy a house with my wife right out of college so that we will have a place to live and start our family. I agree that it is important to make sure that you choose the right location that is near to things like good schools, convenience stores, and other attractions like restaurants and movie theaters. By doing that, find a house will be much easier. Also, I think that another good thing to look for would be a park that is located relatively close to your house.
Great list of real estate tips. As a broker myself, I am often asked for information similar to this, and your post sums it up nicely. Keep up the great writing.
I like that you mentioned using the resources around you for advice like parents and grandparents. It can be daunting to buy your first home on your own. You may want to consider getting a real estate agent as well.