Homebuying for millennials: A comprehensive guide
Monday, 11 July 2016
In 2015 35% of homebuyers were Millennials. 64% married couples, 12% unmarried couples
The median down payment for Millennial buyers was 7% (21% for older boomers and the Silent Generation). 23% of millennials cited a gift (usually parents) as a source of their down payment.
Median income of Millennial homebuyers in 2015 was $77,400 ($76,900 in 2014) who bought an average 1,720-square foot home costing $187,400 ($180,900 in 2014).
63% of Millennials were influenced by the quality of the neighborhood and 60% for convenience to getting to a job.
Buying a home is typically the largest investment most people ever make. If it's your first home purchase, you'll find yourself on the front end of a steep learning curve.
Meghann McKenna, a Bozeman, Mont-based financial advisor, says that while it's nice to have a place of your own, make sure you can really afford it. "Your dream home doesn't need to cost you your dream life and your house doesn't have to define you," she says, adding that paying a mortgage shouldn't tap you out completely. "ou still want to go out to dinner with your friends or to the movies or on vacation, you don't want the mortgage to completely consume you."
Here's her advice for the would-be Millennial homebuyer:
- Do your research
- Use online calculators to compare the cost of renting vs. buying, determine how much house you can afford, and figure out your monthly mortgage amount.
- Go to creditkarma.com or annualcreditreport.com to make sure you're credit-worthy with a score of 700 or more. If not, you may need to improve your credit to get better terms.
- Research loan terms at a site such as mortgagecalculator.org to get a basic understanding of what's realistic for your budget and projected income.
- Seek advice from experts
- Ask people you trust for suggestions for a banker, mortgage broker, CPA, real estate agent, attorney, etc., then have a quick conversation to make sure you're on the same page about your goals and how to get there.
- Consider the hidden costs. Buying a home is one thing. Making sure you can afford to make it habitable is another. For instance:
Appliances: Does the home come with appliances? Do they need to be upgraded (an old refrigerator can cost you hundreds of dollars a year in wasted electricity!)?
Utilities: Ask about the past year's heating, cooling and water bills. These may add hundreds to your monthly output, especially in extreme climates.
Upgrades: You can work at your own pace and probably tackle most cosmetic fixes yourself, but but you should be prepared to pay for a licensed professional for projects that involve electrical, plumbing or natural gas work.
Inspection: Pay close attention to what the inspection report says. You might also be able to renegotiate the purchase price if repairs are necessary.
- Weighing that extra mortgage payment. Making extra payments can benefit you in the long run, but make sure you have cash on hand and you're not sacrificing your emergency savings and retirement contributions in case you need that money.
- Make the most of an extra room. Lessen the brunt of your monthly outcome, but know that if you rent out a room in your home more than 15 days (via a home-sharing site or a longer-term rental), you're supposed to claim the income to the IRS. Have a written contract or lease. This makes it easier in case things go south. You can also rent out the space for a night, a week or a month at a time through AirBnb. Before you agree to become a landlord or de facto hotel operator, be sure you are OK with sharing space with a stranger. If not, perhaps you need a smaller home.
- Working from home. You can deduct a portion of your monthly home expenses if you have a dedicated work-only space.
- Don't buy in a panic. If it doesn't feel right, and if you're uncomfortable about how much you'll be spending every month, wait until the right home comes along. It's OK to walk away! Likewise, if you missed out on your dream home, don't fret, another one will come along.
Includes information from financial professional Meghann McKenna,www.mckennafinancial.com
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
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