Millennials Guide to Entering the Housing Market
Reports from across the nation are forecasting Millennials entering the housing market in great numbers. Though a generation known for starting families later in life than their predecessors, this new economic powerhouse is expected to account for up to 65% of new household formation in the coming years, with 42% of millennials wanting to buy a home in the next 5 years according to a Realtor.com survey. Factors such as student loan debt and availability of credit are uncertainties moving forward, and many millennials are finding themselves with questions about the homebuying process.
Firstly, any prospective home buyer should research how much they can afford. This includes initial costs such as a down payment- which will be approximately 20% of the home’s price. Additional expenses such as title, appraisal, and origination fees may add up to another 5%. Though outweighing initial costs of renting, the opportunity to begin creating equity and take advantage of attractive tax provides a great incentive for millennials to cement their financial futures. Financial experts agree that no more than 30% of household expenses should go to housing needs, and no more than 40% should be dedicated to debt. Be sure to not overload on debt, as it is better to have a smaller home than to risk foreclosure and poor credit.
It is important to choose a real estate agent that has experience working in your chosen neighborhood and possesses the right certifications to meet your needs. Double-check that they are licensed and read their reviews online. Also, feel free to ask if you can speak to a couple past clients. Think carefully about your needs in a home and which neighborhoods you prefer, and ask your agent to find comparable properties in your price range. Prepare to get a mortgage by keeping timely payments, avoiding large credit purchases, and paying down existing debts. The ideal balance for recurring debt is around 30%, as that value will increase your credit score by conveying to potential lenders that you have credit available that you are not utilizing.
Don’t be intimidated by the number of moving parts in a real estate transaction. Your agent will assist you by scheduling and monitoring everything from home inspections to offers and counter-offers. Begin preparing for the homebuying process by monitoring your credit and examining neighborhoods. Have a list of must-haves and questions ready for potential agents to ensure that you find the right fit for you or your family.
Written by Gregory Lyons in Association with Harris Team Real Estate