November 2nd//Home Buying, Real Estate

A Millennial’s Guide to Savvy Home Buying

Home buying rates for millennials are down (way down).  For many, the desire is there, but for various reasons—later average age of marriage, financial constraints—young people in general are slow to aspire to owning a home. For those of you who do want to join the 34% of people under 35 who own their home, Partners Trust’s associates are here to help.

millennial home buying

Whether you’re on track to lay down roots (and rugs) in the foreseeable future, or you’re just dreaming of one day having your own place, these tips will help ensure you’re ready for the adventure of home buying, if and when the time comes.

Set goals.

Look at the inventory in your neighborhood and decide exactly what it is that you want. Then calculate what salary you would need to live there. “Find a dream house online and make it a target,” said Associate Partner David Johnstone, who suggests figuring out the down payment you would need for that home, then posting a photo of the property someplace you’ll always see it. “Seeing it every day keeps it top of mind and keeps you motivated to hit goals.”

Get educated.

Learn as much as you can about the process of purchasing a home, so that you’re not blindsided once you’re ready to buy.  Associate Partner Erfan Haj says, “Don’t assume you know what you need for a home loan and how much you can afford based on your income and credit score.” Align yourself with a seasoned real estate professional and a mortgage professional, who will help you figure out “precisely how much you can afford and how much you need to save up.”

Haj recommends looking into tax laws in the areas you’re house hunting.  Find out the answers to questions like:  “Are taxes reassessed every year or few years, or are you paying on your initial purchase price? How expensive is it to own a home, from an annual tax and cost perspective?”

Sort out your finances. Now.

Johnstone believes it’s crucial that people set up and maintain good practices with their personal finances early. “Stay on top of your bills, your finances, any and all debt, and understand the repercussions on your credit score,” he says. This will help down the road with buying a home as it will make you eligible for better mortgage products and rates. There are great apps to help you with personal finances. Johnstone recommends  ‘Acorns’ which “invests the change up to a full dollar on each purchase on your credit card. So as you are living everyday life, you are building a down payment.”

Save up (and up and up).

In the US, 32% of millennials live with their parents. Viewed as a strategic measure, this could be a great way to save money. Associate Partner Jaisa Bishop recommends shacking up with family or friends while you search for a home. She says  “as your bank account builds, so does your opportunity for personal growth.”  If you’re not able to live rent-free, Associate Partner Roland Wilhelm recommends buyers  “rent a cheaper apartment [while you search for a home]. Stop splurging on high rents or take in a roommate and stash savings.” With long term goals in mind, you may have to sacrifice the ego today.

Secure additional funding.

Start figuring out funding now. If you’re aiming to buy in 3-5 years, Associate Partner Lucy Mao reminds people to  “start being very nice to family members around you.  Or, more seriously, have that conversation with those that might have funds to lend you and create a ‘private loan’ agreement.”  For an FHA loan, which is a loan insured by the Federal Housing Administration, you’ll need to start a relationship with a direct lender or mortgage broker. Mao suggests this over using a big bank as “these smaller brokers can be more nimble and tell you what else they need to see in 3-5 years to make that loan successful.”

Choose the right agent.

Haj encourages buyers to find someone whom they trust implicitly. “Make sure to find a reputable and experienced agent who you get along with and communicate with effortlessly.” Setting up a meet and greet with potential agents is essential.

Know your neighborhood(s).

We’ve all heard the real estate mantra:  location, location, location. It’s true you should love where you live, but it’s also true you need to be able to afford living there. Associate Partner Michael Dilsaver suggests confirming  “the areas you desire to live by driving through and checking out open houses.” Once you’ve found your beloved neighborhood or hoods, have your agent help you learn the available inventory of the areas, “so when the timing is right you already have a good sense if value in that area. “

Consider investment opportunities.

Turning your first home into an investment property can be your  golden goose. If it works for you.  Associate Roland Wilhelm says buying a duplex or another property with a rental income will help you “qualify for a higher mortgage as well as offset a portion of the mortgage.” When it comes time to buy a second home, “converting the first purchase to a full rental property will start you down the road to having passive income as you get older.”  

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