A Homebuying Guide For Millennial's: Buying Younger Builds Wealth Faster
Buying a house before 35 could better prepare you for retirement by age 60, according to a recent Urban Institute study. The nonprofit research group surveyed adults turning 60 or 61 from the years of 2003 to 2015, and this is what they found.
The study showed:
“Today’s older adults became homeowners at a younger age than today’s young adults. Half the older adults in our sample bought their first house when they were between 25 and 34 years old, and 27 percent bought their first home before age 25.”
Results from the study highlight just how much of an impact it has to buy a house at a younger age. Study participants who bought their first house before age 25 had only $10,000 left on their mortgage by age 60 on average. Half of the buyers who bought a home in their mid-twenties and early-thirties had about $50,000 left on their mortgage but had typically purchased more expensive houses.
A number of housing experts have expressed concern that millennials’ homeownership rate, in the 18 to 34 age bracket, is significantly lower than previous generations of the same age. This study provides a helpful incentive for why millennial renters should think about purchasing now instead of taking on another year’s lease.
Retirement is when people start to rely more on their accumulated wealth than their income. But, the Urban Institute concluded:
“Today’s young adults are failing to build housing wealth, the largest single source of wealth, at the same rate as previous generations. While people make the choice to own or rent that suits them at a given point, maybe more young adults should take into account the long-term consequences of renting when homeownership is an option.”
7 WAYS A MILLENNIAL BUYER CAN COME OUT ON TOP
Millennial buyers still prioritize buying a house at a higher rate than other generations, and building lifelong wealth may be one reason why.
TAKING REAL-LIFE ADVICE FROM THE HOUSING AND FINANCE EXPERTS CAN HELP MAKE THE TRANSITION FROM RENTING TO OWNING EASY:
1. COUNT THE COSTS.
There are extra costs that come 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.
If you can afford to buy, there’s 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.”
2. DON’T ASSUME YOU CAN’T AFFORD IT.
Now’s the time to seek professional advice.
Aaron Hendon, realtor, investor, and top-producing agent for Christine & Company with Keller Williams, says:
“Don’t pretend you know everything there is to know. 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.”
3. DEFINE YOUR GOALS.
Research your options and make your plans, while you’re at it.
According to Ryan Hardy, luxury real estate broker and Top Producer 2016 by the Chicago Association of Realtors:
“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.”
4. EXAMINE YOUR FINANCES.
As a next step, Hardy advises millennial buyers to get prequalified for financing, if they haven’t already. The prequalification process is painless, Hardy says. 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.
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 can cost you to wait.
“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 FACADE.
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 can be avoided. Rachel Betterbid of Anti-Pesto Bug Killers suggests crossing a house off the list if you see warning signs of termites, 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.
Betterbid often works with millennial buyers and says she finds the signs of termite infestation frequently overlooked:
“If you’re ready 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. A homeowner that discovers damage from termites will spend an average of $3,000 to repair the damage.”
7. PRACTICE YOUR POKER FACE.
When it’s time to bid, do it 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.”
To keep your cool in a face-to-face meeting, 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.
GET HOME HAPPY AND FAST
Most millennials feel that the economy’s holding steady, and the time is right to buy. Start the house-hunt strong by getting prequalified.