Millennials, otherwise known as Generation Y born between the years 1977 to 1995, are always in the spotlight. You may be one of them, or you may know one. But either way, most people are curious about how the next generation is going to do things differently.
Take buying a house. Once a stair step in the American dream, many millennials remain skeptical. And rightly so. Remember, this is the generation who saw their parents, teachers, and relatives lose something, if not everything, in the Great Recession of the 2000s. Today, millennial buyers are more likely to think twice before buying a house — because they’ve seen firsthand what it costs to make a bad decision. (This generation has been called some of the “pickiest homebuyers,” and again, we don’t blame them.)
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21 percent of millennial buyers recommend buying early
As of 2017, the tides are turning, if ever so slightly. The New York Times reported that, according to Bank of America’s second annual Homebuyer Insights Report, 68 percent of millennial homebuyers consider their current home a stepping stone or starter home on the way to their big picture goal. These are the buyers who have chosen to purchase instead of waiting and proceeding with caution, as has been the practice among millennials.
These are the same homebuyers who also feel confident they made the right decision to buy:
- 86 percent of millennial buyers consider owning a home to be more affordable than renting.
- 80 percent of millennial buyers say homeownership has positively impacted their long-term finances.
- 60 percent of millennial buyers would encourage their younger selves to start saving for a house sooner.
- 42 percent of millennial buyers encourage other buyers to consider extra maintenance costs and expenses attached to homeownership.
- 39 percent of millennial buyers are more likely than other generations to associate homeownership with adulthood.
- 21 percent of millennial buyers encourage other buyers to buy early to begin building equity.
It’s hard to pull the trigger, but we make buying a house easy. Get prequalified online.
7 ways a millennial buyer can come out on top: Insider tips
There are hundreds of homebuying guides on the Internet, with very few geared toward millennials. Knowing what we know now — that one of the largest generations in history feels that purchasing a home is a smart financial decision — it’s safe to say that millennials entering the housing market need extra support.
There’s no shame in asking for help, especially when buying your first house. So, we did it for you.
We consulted the experts and came up with seven millennial-specific, real-life tips that can make buying a house easy:
1. Count the costs.
Your lender can help you get a better grasp on your financial picture. But as the millennial buyers surveyed above reminded us, it helps to consider that there are extra costs associated with buying a house. Timothy Wiedman, certified financial planner and retired Personal Finance instructor, lists down payment, buyer’s closing costs, moving costs, move-in costs, and maintenance among some of the biggest.
“According to the National Association of Realtors, the median price of an existing single-family home in the U.S. was $232,100 during the first quarter of 2017. And a ‘conventional’ mortgage loan generally requires a 20 percent down payment, which works out to $46,420 for a median-priced home,” Wiedman says. “But even if one qualifies for the popular FHA 203(b) mortgage loan (with a 3.5 percent down payment), that still works out to an $8,123.50 down payment on that median-priced home.” Closing costs can also reflect a wide variety of variables, though Wiedman estimates they may be closer to 4 percent of the purchase price, in some cases.
If you can afford to buy, there is a silver lining. Wiedman says, “Over time, most homes appreciate; so, in the end, it’s generally not as expensive as it sounds. Further, you have to live somewhere; and unless you stay in mom’s basement, it won’t be free. I’ve bought and sold several homes and always came out ahead of the game — but I didn’t get rich either!”
2. Don’t assume you can’t afford a home.
We touched on this above, but it’s worth mentioning again. “Get with a good lender and realtor and learn what is available. There are many down payment assistance programs. There are always neighborhoods and areas in even the hottest markets where you can find bargains. You might be a poor judge of your financial viability, and on and on,” Aaron Hendon, realtor, author, speaker, investor, and current top-producing agent for Christine & Company with Keller Williams, says. “Seek professional advice. Don’t pretend you know everything there is to know. There is often a way available when you look into the details.”
3. Define your goals.
Research your options, while you’re at it. Make your plans. Ryan Hardy, luxury real estate broker and Top Producer 2016 by the Chicago Association of Realtors, says, “Given that buying a home is such a big step, it’s important for you to educate and prepare yourself as much as possible in advance. This means clearly determining why you’re buying and what kind of home you’re looking for.” Because buying and financing a home are so closely related, Hardy says, it also means examining your current financial situation and projecting how much you can afford.
4. Examine your finances.
As a next step, Hardy advises that millennial buyers get prequalified for financing, if necessary. “Unless you’re paying cash, it is generally recommended that you get prequalified for a loan before you start viewing homes and making offers,” Hardy explains. According to Hardy, the prequalification process is painless. It can be done over the phone or online with the lender of your choice. Your current financial situation and credit history will determine the amount you qualify for and set the budget for your home search.
Where can you find a lender you can trust? Look for a Cornerstone location near you.
5. Check in on current mortgage rates.
Buying a house may seem pricey at face value, but as many millennial buyers have already discovered, it could cost you to wait. “Since the election, mortgage interest rates have inched upward a bit. Some experts believe that this trend will continue as the economy improves and the Federal Reserve continues raising interest rates,” Wiedman says. “While nobody can really predict how much mortgage interest rates may rise, waiting to buy might mean slightly higher monthly mortgage payments down the road.”
6. Look at the cracks in the façade.
There’s nothing more depressing than buying a dream-house-turned-lemon. But if you know what you’re looking for, major household issues that pop up over time are easy to avoid. Rachel Betterbid of Anti-Pesto Bug Killers says she often works with millennial buyers and finds the signs of termite infestation frequently overlooked.
“If you’re looking to buy a home, you should definitely keep an eye out for termite infestations in particular, as they cause over $30 billion of damage to crops and structures in the U.S. every year. On average, a homeowner that discovers damage from termites will spend an average of $3,000 to repair the damage,” Betterbid says. Betterbid suggests crossing a house off the list if you see warning signs like hollow-sounding wood, swarms or discarded wings, and cracked or distorted paint. Odd sounds and smells and gnaw marks or holes can also indicate infestation.
7. Practice your poker face.
Finally, the time has come to strike – but with balance. Hardy recommends millennial buyers come across motivated, but not too eager. “It’s important that you don’t tip your hand to the listing agent. Save your excitement for later. Every negotiation is unique, but if you can justify your offer price with recent market research, you are in a strong position.” The best way to keep your cool in face-to-face meetings? Familiarize yourself with recent sales in advance, so you can negotiate from knowledge. Hardy also suggests drafting an offer to demonstrate that you are a serious buyer – the kind that sellers look for.
Most millennials feel that the economy’s holding steady, and the time could be right to buy. If that sounds like you, start the process off right by talking with a lender first. We can answer your questions, look at your financials, and help you get prequalified. To make things easy, we’ve put it all in an app.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.