What Is the Average Age to Buy a House?
Millennials come with a litany of perceptions. They’re sometimes stereotyped as lazy, not having or wanting jobs, and portrayed as bingeing on Netflix and probiotic drinks from the comfort of their parents’ basement.
With murky perceptions like this, it could be easy to believe that millennials aren’t interested in investing for their futures. Of course, this narrative is overly simplistic at best, and dead wrong at worst.
Many millennials have had to overcome major obstacles to homeownership that their parents didn’t have, such as college costs that are growing faster than wages and ever-mounting student loan balances .
Interested in buying your first home? While the statistics on the average age to buy a house are intriguing, it might not be a productive use of your energy to compare yourself to others. In addition to the numbers, check out other measurement tools below to see if you’re on track to buy a home.
Average Age of First-Time Home Buyers
According to the National Association of Realtors, millennials made up 36% of all homebuyers in 2018 , making them the single-largest buying group by generation. And, it is likely that the share of millennials buying homes is only going to grow . Boomers slid into second place with 32% of purchases, followed by Gen Xers at 26%. These statistics are for all buyers, not just first-time home buyers.
First-time home buyers actually make up a minority of total home buyers at just 33% overall, falling from 34% the previous year . The proportion of first-time home buyers hasn’t been 40% or higher since 2010 , which also happened to be the year that the tax credit for first-time home buyers came to an end.
Given the fact that the majority of home buyers are not first-time home buyers, it’s not a surprise that the average age to buy a house in 2018 was 46 years old .
The average first-time home buyer does appear to be getting older compared to years prior. This likely has less to do with millennials’ desire to own a home, and more to do with the current market environment.
According to Lawrence Yun , chief economist at the National Association of Realtors, “With the lower end of the housing market—smaller, moderately priced homes—seeing the worst of the inventory shortage, first-time home buyers who want to enter the market are having difficulty finding a home they can afford.”
What’s a Good Age to Buy a House?
There’s no one answer to this question that is going to be right for everybody. In general, people should pay less attention to the average age to buy a house and should instead focus on feeling ready, both financially and emotionally. Considering that people come with a wide variety of financial backgrounds, the “right” age will be different for everybody.
You could be asking yourself these home-buying preparedness questions instead:
1. Do I feel ready to put roots down?
To offset the one-time, up-front costs that usually come with buying a home, most buyers will want to stay in one place for a while. This might not appeal to someone who wants more freedom to move around.
Do you feel comfortable with the idea of settling down in one spot? Is there a possibility that you or your spouse would get a job transfer, or apply for jobs in other locations?
2. Have I defined my financial goals?
Before buying a home, you might want to spend some time thinking about your financial goals and examine how owning a home fits within that framework. For example, do you want to own a home before you retire, so that you don’t have mortgage payments in your golden years? What will it take to make that happen?
3. Do you feel comfortable with your financial situation?
Being your own landlord and making monthly mortgage payments are big responsibilities. To fully enjoy living in your home, you may want to make sure that you’re feeling financially comfortable.
Do you feel stable in your current job? Could you pay your mortgage for a few months even if you were to lose your job? Are you prepared in the event of an economic recession?
How Much Should I Save to Buy a House?
At the beginning of the home-buying process, you may want to sit down and determine how much home you can afford. There are generally two major up-front costs—the down payment and the closing costs. Closing costs can include lots of different items (more on that below). In addition to these costs, homeowners may want to consider building an additional cash buffer in case of emergencies or if the lender requires reserves after loan closing.
How much down payment you’ll need can depend on different factors. The loan program, property type, even DTI or credit score may dictate a minimum down payment. Additionally, consider how much you might feel comfortable putting down, knowing that a larger down payment up front will lower monthly mortgage costs.
For example, an FHA loan only requires a 3.5% down payment for borrowers with a FICO® score above 580. With scores between 500 and 579, a 10% down payment is required.
While it is no longer true that you’ll need a 20% down payment to qualify for a mortgage, most lenders require a 20% down payment or they’ll charge private mortgage insurance (PMI). If not paid for by your lender or paid as a lump sum, PMI will increase your monthly mortgage payments.
Closing costs refer to the variety of fees for processing an applicant’s paperwork, creating a loan, and transitioning the ownership of the house. It is industry standard for closing costs to run a buyer between 2% and 5% of the value of the home. Closing costs won’t be the same for every lender and in every home-buying location or scenario—this is why it’s usually a good idea to shop around for lenders.
There are dozens of expenses that could fall under the umbrella of “closing costs.” The most common ones are lender fees such as loan origination fee, or third party fees such as appraisal fee, title and escrow fees, PMI if applicable and more.
Additional Cash Buffer:
During the home-buying process, it is possible for unexpected costs arise. It is generally a good idea to go into the home-buying process with more cash than you expect to need if at all possible.
Some recommend that people—not just homeowners—have as much as six months of savings in the event of an emergency, such as an unexpected job loss or needing to take time off work to care for an ailing family member. Exactly how much you’ll need depends on what you’re comfortable with.
It could be a good idea to work with your real estate agent and lender to get a better feel of how much you’ll need to have saved up in order to buy a home of your own.
The next step might be to put a savings plan in action. Here are some tips:
1. Calculate a monthly savings goal.
After determining how much you need to save, you could set a time goal for yourself in months. If you divide your money goal by your month goal, and that’s how much money you likely need to save each month.
For example, say that you want to save $10,000 over the next 24 months. This means you’d need to save about $416 per month in order to meet your goal. For some, seeing the number is inspiration enough to put a savings plan into motion. For others, it may put into perspective what is possible over a given time frame.
2. Set up automatic savings.
You could set up a transfer of money from your checking account into a savings account that pays interest. Automating savings could be a great solution for lots of reasons—it removes human error (or forgetfulness) from the equation, and it gets money away from a checking account, where it’s far too easy to spend.
3. Prepare for short-term pain.
Putting together a lump sum in a short period of time can be hard. In addition to all the “usual” methods of saving money, like cutting out lattes, is there anything you can do for just a short time period that could really move the needle? For example, could you move somewhere cheaper or live with a parent for a few months? Rent out a room in your current place? Making a sacrifice in the short-term could be the boost a first-time home buyer needs to accumulate the capital necessary to make the dream happen.
4. Work on your credit score.
Though this may not help you save up a down payment, improving your credit score could result in some impressive long-term savings. Among other factors, a lender considers your credit score when determining the interest rate they will offer on a mortgage loan.
The difference between even a percentage point on a mortgage might not seem like a big deal, but it is, due to the way interest rates compound over time.
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