It’s no surprise that the boom in the real estate market has impacted buyers of all budgets. Bungalows that would once go for $300,000 are being purchased at nearly one and a half or double that in the current market! As a millennial in my 20s I understand the immense effect this has on being able to afford a home. But, this is not to say that millennials can’t and shouldn’t purchase a home in the escalating market. In fact, 86% of millennial buyers suggest that owning a home is a more affordable option than renting.
Here’s a list of tips for the millennial home buyer. Of course these are considerations for all home buyers, but these are especially relevant to the young, first time home buyer.
1. Consider all the costs.
There are more costs to consider aside from the cost of the home. You want to make sure all your bases are covered or at least accounted for before you make the big step of purchasing a home. A down payment, buyer’s closing costs, moving and move-in costs, as well as any maintenance and any repairs or renovations are important considerations. Don’t forget about house insurance and property taxes as these may impact which house in which neighbourhoods you can and cannot afford.
On the bright side, owning a home is an investment and almost always appreciates in value!
2. Can you afford to buy? Don’t assume you can’t!
Do you research to find out what’s available at your price point. Know your budget and seek professional advice from a realtor and lender. Chances are there is something available to you, so don’t assume you’re not a fit buyer. It may just be purchasing in a different area or waiting for a bargain.
3. Know your goals and intentions.
Think about a. Why you’re buying a home and b. What kind of home you’re looking for. Then, look at your financial situation and what you expect it to look like in the future. You want to make sure that your house purchase and financing go hand in hand with your home and life goals.
4. Seriously examine your finances (the nitty and gritty).
Before you put an offer in on a house and even before you start viewing homes, get pre-qualified for financing. The amount you qualify for is determined by your current financial situation and your credit history. Use the financing qualification as a budget for your home search. To further guide your budget, remember the 28/36 rule- your mortgage payment, property taxes, and insurance should not exceed 28% of your gross monthly income. These combined with total debt payments should not equal more than 36% of your monthly gross income.
5. Check out the mortgage rates.
You might be holding off to buy now because of housing costs but rising interest rates in the future may mean that waiting will actually cost you. Rising mortgage rates mean higher monthly mortgage payments. If it fits the finances, purchase.
6. Don’t get stuck with a money pit.
If something doesn’t look quite right with a house that you’re interested in, get a second opinion or move on. Keep an eye out for mold, odd smells, dampness, and any signs of insect infestation. Repairs can be costly and expenses can be unanticipated, don’t get stuck with issues you’re not ready for.
7. Be motivated, but not too eager.
Purchasing your first home is exciting but don’t jump at the first home that catches your eye. Do your market research- familiarize yourself with comparables in the neighbourhood so that you can justify your offer price.
Of course, owning a home is a far better investment than renting, so if you have the desire and means to purchase a starter home, you should. Your home purchase should match your finances and goals. Understand mortgage rates, recognize warning signs of a bad buy, and brush up on market research. Being a young home buyer is exciting and a great learning opportunity! There’s almost always something for everyone so don’t count yourself out too soon.