These days, your twenties are synonymous with uncertainty and change. With more opportunities available to young adults than ever before, it’s common to know someone whose moving to another coast for a job opportunity or spending a few years volunteering abroad. In the midst of all these adventures, millennials are slower to put down roots than previous generations.
In fact, according to the National Association of Realtors, homeownership is down over 7% from 2005. Whether this drop is due to cultural change, economic factors, or a mix of the two is uncertain, but we want to make sure that when twenty-somethings are ready to enter the housing market, they can do so with confidence.
Whether you yourself are a millennial or you’re just a first-time homebuyer, give this post some thought. We’ve got tips to help make your first venture into real estate a breeze.
Face Your Finances
This is the big one. A lot of twenty-somethings are dealing with tough obstacles in the financial department: underpaying jobs in a recovering economy mixed with high debt ratios. Before entering the housing market, it’s critical to get your financials in decent shape. Here’s what Realtor Magazine says you can do to become a better-qualified buyer.
- Debt: Paying down as much debt is possible is critical to buying. Always pay your bills on time and pay above the minimum payment whenever possible.
- Savings: Most mortgage companies look for buyers to make a 20% down payment on a home. Try to stock away as much money as possible so that you can comfortably pay that cost and have money left over for unexpected expenses.
- Budget: Sit down and be honest with yourself about how much you feel comfortable paying monthly. Remember to take utility payments and repair costs in to account. Then, challenge yourself to only look at properties you can afford.
- Employment: Stable employment is non-negotiable for financial institutions. Most require two years at the same company. Be prepared to show your pay stubs, if needed.
If looking at that has made you realize that maybe you’re not ready to enter the housing market right away, don’t worry. It’s never too late to start bettering your financial situation. Work slowly at paying off your bills and putting money away. Eventually, you’ll be able to enter the real estate market with confidence.
Focus on a Five-Year Timeframe
We’ve noticed a trend in how millennials talk about real estate. Either they are totally turned off by the prospect of buying because they’re not ready to settle down in one place or they want to jump right in and buy the dream home that they’ll live in for the rest of their lives.
We advocate aiming for the middle ground. Think in terms of a five-year timeframe. At this point, it’s unlikely that you’ll be able to afford your forever home. However, a decent starter home is well within the realm of possibility.
Think about it this way: Five years is enough time to let you build substantial equity, which will put you in a better financial standing when it’s time to take the next step. At the same time, it’s also a short enough period to accommodate life changes. If you move to a new city, you can always sell the property or, if you’re just ready to move on to bigger and better things, consider keeping it as an investment property.
Look for a Home’s Potential
Unfortunately, it seems like all of the realty reality shows have done a bit of a disservice. On those shows, it’s common to see people turn their noses up at perfectly nice properties because of a lack of top-end upgrades like stainless steel appliances or the proper paint color. In real life, most first-time homebuyers have to focus on a property with potential.
Let’s be honest: the odds of a first-time buyer being able to afford a sizable home in a nice area with tons of top-end upgrades is slim. So, our advice is to prioritize. When looking at properties, focus on the fulfilling the attributes that are most difficult to change. Then, as you live in the property, customize the home to fit your personal style.
What are those difficult-to-change attributes? Things like location, the length of commute to and from work, the quality of the local school district, the amount paid in property taxes, and proximity to public transportation and/or nightlife. Factors like a gourmet kitchen or a little leftover wallpaper in the dining room can be remedied in time.
Hire Professionals You Trust
The real estate market can be tricky to navigate, especially if it’s your first time. While it may be tempting to try and score a deal by looking at for-sale-by-owner properties or auctions, doing so is often a recipe to find yourself surprised by unexpected repairs and fees. It’s much better to hire seasoned professionals – even if they come with a price tag – who can guide you through the buying process.
We’re not just talking about realtors either. Since you’ll likely be mortgaging part of the house, you’ll want to hire a loan office that’s able to walk you through your financials. Depending on the regulations in your area, you’ll also need a title company or attorney to handle the deed transfer, home inspectors, and contractors to handle any necessary repairs.
Regardless of which professional you’re hiring, you’ll want to choose someone who makes you feel comfortable. Always interview a selection of applicants, ask for recommendations, and double check their credentials. Hire someone who is able to confidently answer your questions, fluently explain their services, and return your calls in a timely manner. Doing so, is the surest way to pave the way for a smooth transaction.
Millennials, and many first-time homebuyers face special challenges when it comes to entering the housing market. Whether it’s a lack of disposable finances or an uncertainty about where to turn for assistance, owning real estate can be a daunting prospect. But, we’ve got the tips to help you achieve success. Take a look at the post above and use it to guide your housing search. Whether you’re ready to buy today or just gathering information for the future, we guarantee that everyone looking to make a move can come away learning something new.
Millennials, what questions do you have about buying? Homeowners, what advice can you give to the next generation? Leave your thoughts i the comments below.