Preparing to buy your first home is a thrilling time. Dreaming up all the new furniture, new routines, and brand-new life you’ll live inside those four walls is exciting. And it appears that a portion of the millennial generation is ready to get in on the happy home action.
Realtor.com’s 2021 Housing Market and Predictions projected that members of Generation Y will continue to shape the market, both as first-time buyers and “trade up” buyers, as nearly 5 million Americans turn 30 every year through 2024.
If you happen to be one of these would-be millennial homebuyers, you may have questions about where to look, how to pick a real estate agent, how to save for a down payment, and how to deal with a heated seller’s market.
The process requires being realistic about how much home you can afford, learning about the many resources available, and tips that millennial homebuyers can use to make the entire dream come together.
Recommended: What Is the Average Age to Buy a House?
Pay Down Debt First
The average millennial carries $27,900 in personal debt, excluding mortgages, according to a 2019 survey conducted by The Harris Poll. A big bulk of that debt is student loans. The Pew Research Center found that the median amount of student loan debt carried by millennials was $19,000.
Clearing out other debts may be a great place to start on a millennial homeownership journey. That’s because you’ll likely need to take out a mortgage to purchase a new house, which will account for an even larger portion of personal debt.
There are several strategies to pay off debt or other student loans, including the snowball and avalanche methods.
Recommended: Home Buyer’s Guide
Save for a Down Payment
After paying off outstanding debts it’s time to start thinking about saving for a down payment. Though traditional thinking dictates that people should save enough to cover 20% of the house cost, there may be a way to put down even less.
In fact, the down payment on a house can be as little as 3.5% for those who qualify for an FHA home loan, and in a few cases, a person may be able to buy a home with no money down at all. (This option is usually reserved for veterans and those who qualify for a USDA home loan in rural areas.)
All of the different down payment options come with their own benefits. For example, putting down 20% may mean a better mortgage rate and could make monthly mortgage payments more manageable.
Once you figure out what you may qualify for, a good next step is to start saving toward a down payment. That can be done in a number of ways (just like paying down your debt), including proper budgeting, the snowflake savings method, taking on a side hustle, or even asking your boss for a raise.
You might even ask Mom and Dad, Granddad, or Aunt Charity for a gift.
Determine Your Must-Haves
Here’s one of the most fun parts about purchasing a home: getting to plot out a dream space.
Before starting your home search, it’s helpful to take some time and think about what you really want. Do you want an open-concept home, or need a minimum number of bedrooms and bathrooms? Are you looking for a condo, single-family house, or townhouse?
Get down to the nitty-gritty and think about everything on your must-have vs. like-to-have list to narrow the search.
Recommended: How to Know If You’re Ready to Buy a Home
Find a Real Estate Agent
A buyer’s agent will be your partner throughout the homebuying process, a guide from the first viewing to closing the deal. A real estate agent has access to the multiple listing service, which allows them to sift through every home in your area at once.
A real estate agent is also well-versed in what needs to take place before a person can take ownership of a home, including everything from the offer process to home inspection and insurance.
They may also already have a list of trusted inspectors, lawyers, contractors, and insurance agents a buyer may need along the way.
Though you don’t technically need to use a real estate agent to purchase a home, it may be a good idea to have an experienced and knowledgeable person by your side.
According to a survey by Homes.com, 44% of people felt stressed throughout the homebuying process, but having a navigator may ease the pain.
Set Up Real Estate Alerts
Once your list of must-haves is complete and you’ve picked a real estate agent to assist you, it could be a good idea to set up alerts across listing sites such as the MLS, Zillow, and Redfin. You’ll be notified whenever a home in your chosen area, price range, and desires comes on to the market.
These websites also typically allow users to save favorites and gather intel on a specific home such as its tax and sales history. They also allow users to book viewing appointments.
Think About Long-Term Value
While viewing homes, it may be easy to fall in love with fresh subway tiles, staged furniture, and the simple shine of a brand-new spot. However, it helps to take a beat and a breath and think about the long-term value of the home.
Are you buying this as a forever spot to raise a family? Then make sure the schools are a good fit and it’s a walkable neighborhood. Looking at purchasing a home to rent out short term? Check local laws to ensure you’re zoned properly.
Want to purchase that new place but plan on painting the front door red and planting trees? You may want to ensure it’s allowed by the homeowners association, if one exists. That way you don’t buy a house and become stuck with things that don’t work for the long haul.
Recommended: Local Housing Market Trends by City
Prepare to Make a Personal Plea
Once you’ve found the right spot in your price range that comes with all your must-haves, it’s time to put in an offer. However, you could be just one of many putting in similar offers for the home. There is something you can add to your offer to stand out from the crowd: a personal letter.
Write a letter to the current homeowner expressing how much you love the space and why you feel you’d make the next great owner. You may also want to point out all the things you love about the home design.
Beyond the letter, there are a few other ways your offer can stand out. Talk to your agent about providing a quick closing date, offering to pay for things like a termite inspection, and even offering to rent back the home to the owners until they are ready to move out to help move your offer to the top of the list.
Shop for a Mortgage
When choosing a home loan, you may want to shop around and see the various offers from lenders.
When looking at mortgage options, look into loan terms, the application process, and of course interest rates, but don’t forget to look for hidden fees in the application or repayment of the mortgage.
A lender to consider is SoFi, which offers a variety of mortgage options without hidden fees and with competitive rates.
Millennials face challenges when buying homes in a hot market, but many are suiting up to take the homebuying plunge. Members of Gen Y can employ a number of strategies before searching for the right mortgage.
A lender to consider is SoFi, which offers a variety of mortgage loan options with competitive rates and without hidden fees.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.