Are You Ready to Buy Your First Home?
For the millennial generation, homeownership can still be intimidating. Here's what you should consider before making an offer.
Buying a home is easier when you've first taken stock of your financial situation and what you expect the next few years to look like.(Getty Images)
What does it take to activate a millennial homebuyer? Are the reports true that the younger generations prefer renting over homeownership, the American dream? As the market indicates and many real estate professionals can attest to, that's not the case. Millennials do want to own a home, but many don't know how to navigate this field. After all, it is the largest purchase most people ever make, and requires many considerations.
So, how does the traditional process of buying a home jive with this technologically savvy generation that is used to relying on data derived from computers? More importantly, how do you know when you're ready to buy, and how do you know what to buy? There's no right or wrong way to answer any of these questions, and how you move toward homeownership is based on a variety of factors, both deeply personal and connected to the real estate industry overall.
See:The Best Apps for House Hunting ]
Here are five important things to consider and questions this generation can ask themselves to figure it out:
- Money matters.
- How long you plan to live there.
- The online marketplace.
- Expert advice.
Do you need a mortgage, and how much are you able to put toward a down payment? Discuss your financial wherewithal with a mortgage banker, mortgage broker or financial advisor who can give you feedback on your individual financial situation. Review monthly home expenses, including property taxes with mortgage payments, compared to the option of renting. The monthly outlay may not be much different from renting, but consider whether you will see appreciation in property you own over time. In comparison, rent typically increases over time, unless you live in a rent-controlled building.
How Long You Plan to Live There
Most homebuyers should purchase with a minimum five-year window in mind. It's unlikely that you will make a profit selling after just a year or two, and flipping a house requires experience and skill.
Read:What Is a Condo – and Should I Buy One? ]
Should you purchase a starter home or wait until you can afford something bigger? Many millennial buyers struggle with this decision for one obvious reason: money. When is the right time to take the leap? This is the kind of soul searching buyers have to do for themselves. Sometimes when you wait, you might miss the market completely. Adversely, if you wait longer to have a larger budget, it will afford you to get more of what you want on a longer horizon.
The Online Marketplace
The internet is not the gospel when it comes to real estate. It's a great source for floor plans and photos, but remember that it's a marketing tool geared toward luring you in. Automated home valuation tools like Zillow's Zestimate are not always spot on, and should be double-checked by a human with real estate expertise. A great real estate agent is often the best source for comparable sale information, as he or she knows the ins and outs of the local market. Most importantly, this is your home you are shopping for – there are some intangibles that matter in owning a home that will factor into your final decision, and are often found in person rather than online.
Do not discount the value of a real estate professional you can trust. They are experts in their field and will make navigating the transaction much easier. Many new buyers do not realize that they are paying for this service whether they use it or not. The total commission is already negotiated between the seller and the listing agent, and is built into the sale price. The seller pays both agents at the closing. There may be a small incentive to the seller if you buy without and agent, but it is to your disadvantage when you forgo representation and the expertise the right agent can provide.
The joy derived from homeownership has a price that is worth more than a simple mathematical, scientific analysis. Though this decision must make financial sense, there is without a doubt a happiness factor that comes from owning a home that one cannot put a price on. From their growing representation in the homebuyer market, millennials want a piece of this American dream as well.