Corey Burr is Senior VP of TTR Sotheby’s International Realty.
A rapidly growing number of millennials are jumping into the real estate market. Prior to Covid-19, Realtor.com predicted that millennial mortgage purchases would make up more than 50% of all new home loans this year. Even with the effects of the pandemic, millennials still managed to purchase homes. For many of them, their motivation to buy falls into the “don’t want to miss it” category. Some are fearful that they will miss out on record-low interest rates and want to buy a home before already high prices climb any further.
This enthusiasm is often tempered by the fact that the homebuying process can be intimidating and overwhelming. Not only are millennials faced with the difficulties of the traditional process, but a recent Realtor.com study found that 71% of millennials expect at least some competition during their home search.
If you’re a first-time buyer, here are seven tips that can help demystify the process.
1. Evaluate your financial health. Make sure you are ready to take this huge financial step, which will likely be one of the most significant investments of your lifetime. Take the time to closely examine your credit report. A weak report or poor credit score can prevent you from qualifying for a low mortgage rate.
2. Do the math. Having enough money to make a down payment and pay closing costs is great, but you also have to factor in the costs you’ll be incurring after you move in. Have you calculated the property taxes, insurance and utility bills you’ll be paying from day one? If not, you could be in for a rude awakening. Be prepared for the unexpected and the “what ifs.” Will you be able to pay for a new roof if it begins to leak? Will you be able to foot the bill if your furnace goes out during the dead of winter? These unexpected repairs usually need to be addressed immediately.
3. Buy within your means. Purchasing and living in a fantastic home is an amazing experience, but being “house poor” isn’t. Take a step back and evaluate your situation. If are going to have a hard time paying your monthly bills and covering routine maintenance on the house, you will have to cut back on things like eating out at restaurants, taking vacations or upgrading your property.
4. Find the right neighborhood. When buying a home, you need to make sure the neighborhood fits your lifestyle and interests. If you depend on public transportation to get around or commute to work, you will want to live near a bus route or subway station. If you have children, you should consider the quality of the schools nearby.
5. Trust an expert. Work with an established broker who intimately knows the area, but also understands your needs and preferences. If you’re cash-strapped, find an agent who can help you find a reasonably-priced home that is likely to appreciate in value quickly. An agent who knows where to find the hidden gems and bargains on the market is invaluable, thanks to their wealth of contacts and experience.
6. Find a great lender. There are many lenders to choose from in the marketplace. Invest the time to talk with a number of them to find the right person. Also, inquire about what types of loan programs would be available to you, from adjustable-rate mortgages to 15- and 30-year fixed loans. Some lenders even offer loan products that can wipe out student loans. The choice of which loan program is right for you is primarily determined by one’s risk tolerance and the period of time one plans to own a particular piece of property. Lastly, compare the interest rates offered on the program that you prefer.
7. Don’t let irrational exuberance get the best of you: Buying a home is often an emotional experience, but you can’t let your emotions get the best of you. You need to take time to determine whether a home is right for you in the short-term and long-term. If you are recently married, but not ready to have kids for a few years, a two-bedroom condo in a bustling urban area might be perfect for you. On the other hand, if you want to start a family immediately, you should probably focus on finding a property that allows for some room to grow.
Achieving the American dream of homeownership is an unforgettable experience. If you do your homework, thoroughly evaluate your financial situation and partner with an excellent agent and lender, you can greatly simplify the process and ensure a successful outcome.