Millennials have been the largest share of homebuyers in the market since 2014. If you're in this generation and thinking about purchasing your first home, it can be daunting out there, so it's especially important to start the hunt with these essential homebuying tips.
1. While digital might be king, you'll still need a realtor:
Regardless of age, looking at homes online is the first step. In fact, the National Realtor Association (NRA) found that buyers were more likely to walk through the homes that they viewed online. Most realtor companies automatically list all available properties on their sites, and many house hunters used sites such as Zillow and Redfin to preview the homes they want to walk through in person.
Regardless of what you find online, you'll need a realtor to help you gain the quickest access to viewing a home and realtors often have insights to homes that have yet to list. With most homes selling within two weeks of listing, a realtor can help you move through the process quickly and get an offer in front of the buyer. They can also assist you down the road with necessary steps such as making counter offers, getting a final inspection, understanding paperwork and negotiating closing costs.
When interviewing a real-estate agent, it's good to find out how many other clients they are currently serving (for availability), their years of experience and how long they have been in the local market. But ultimately, finding someone you can trust and understands your needs is the most important.
2. Bigger isn't always better:
During the pandemic, some millennials began moving out of big cities and into less expensive suburban areas where they could find larger homes at better prices, but those trends are changing. Currently, millennial homebuying trends are skewing away from more deluxe homes in suburban locations. According to a 2021 NAR report, millennials were 82% more likely to purchase larger homes in need of remodeling or repairs (compared to boomers at 62%), but 1 in 4 millennials who did so regret it.
Unless you have a large family, or both partners are working from home and need office space, bigger homes usually mean more cleaning, furniture purchases, maintenance, yardwork and landscaping and heating/cooling costs. While larger homes used to be a status symbol, about half of millennials are opting for smaller, more functional homes. So get your priorities figured out first, it will save you time.
If you aren't looking to remodel and want a newer home, in a more urban setting that offers amenities like public transit, access to grocery stores, restaurants and bars, townhomes are a great option. While they are stand-alone structures, they have shared spaces (like yards or driveways) with additional units. They host a smaller overall footprint on multiple floors but are built with more modern features and comforts and tend to be more energy efficient and sustainably built.
3. You've heard it before, Location, location, location:
Urban areas may be a bit quieter and offer larger homes and yards (think maintenance and other costs mentioned above), but short commute times and access to public transit are harder to come by. Distance from work, parking fees and commuting costs add up. With many employers offering free transit or metro passes, it pays (or saves) to be near a transit hub or commuting center. Drive times and traffic are also a factor, especially for those looking to be more environmentally conscious with their driving habits, or just hate sitting in traffic.
4. Get your finances in order:
Whether you're single, married or living with a domestic partner, homeownership these days takes saving for a down payment or a dual income to afford monthly payments. Skyrocketing rent, inflation, cost of living and student debt are all making it hard for millennials to save. Not surprising, the NRA (National Realtor Association) reported that in a post-Covid market, 63% of millennials have no savings for a down payment.
If you're having trouble saving or finding money for a down payment, here is a list of things you can do to ensure you can financially make the move to home ownership:
- Review your finances: What can you cut from your everyday budget, like coffee runs and personal training sessions? What items can you go a year to two without, like expensive vacations and weekend concert tickets? Those expenses add up over a few years in significant ways.
- Check your credit report: Look for errors or past-due accounts. The higher the credit score the better interest rate you'll get on your mortgage.
- Look for down payment assistance: First time home buyers can apply for down payment assistance programs if they have an income below a certain level. Talk to a loan officer to see what's available to you.
- Make a list of needs vs. wants: You may "want" 14-foot vaulted ceilings, but do you "need" them? What are your dealbreakers? What can you compromise on? What are your "must haves?"" This will help your agent pinpoint the homes you should see and save everyone's time and money.
- Get your documentation ready: Mortgage lenders want to see bank statements from the past few months. If you have any down payment gifts coming, deposit those at minimum, 60-days prior to your application. This gives the funds time to season. This indicates to the bank that you're a more qualified borrower and that you didn't appropriate the funds from a fraudulent or quick loan lender.
- Educate yourself: First-time home buyers' classes are widely available and often required by some mortgage lenders. They educate you about the process before you start jumping through the hoops and can even sometimes end up saving you money on your mortgage. Classes can range from $25 - $125 and run from four to eight hours long and are offered online or in person.
- Set a budget and stick to it: Sometimes relators will show you homes above your price range, or you may be tempted to increase your budget, but don't let yourself get carried away. If you can't make the payment, lose your job, or experience a financial emergency, you'll chance losing your home altogether.