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Millennials are entering the housing market in droves. Between 2016 and 2017, the homeownership rate of people under the age of 35 grew from 35.6% to 36.8%. In 2018, 37% of all homebuyers were millennials, making them the generation with the biggest number of buyers.
Perhaps you’re a millennial, and you’re looking for your first home. You might be buying on your own or with a partner.
You might be wondering how to buy your first house as a millennial and what the top tips are for millennials buying a house. Here’s your complete home buying guide for millennials. Learn more about the cost of homeownership, what to look for in a house and how to know when you’ve found the one.
Make Philadelphia Your Home
Most homebuyers use financing to pay for their new home. If you plan on financing your purchase, you need to understand how mortgages work and what your mortgage options are.
Mortgages differ in terms of how long you have to pay them back. Some are 30-year loans, meaning you can make payments on the mortgage every month for the next 30 years. Other term options include 15-year and 10-year loans.
Mortgage interest rates also differ. Some home loans offer a fixed rate, meaning you’ll pay the same interest rate over the life of the loan. Other loans have an adjustable interest rate. The interest charged on the loan can increase or decrease at specified intervals, depending on what is going on in the market.
Understanding the mortgage options available to you will help you choose the loan that works best with your budget and plans.
Before you start looking at homes, it’s a good idea to know what your budget is. Otherwise, you might find yourself checking out homes that are way out of your price range. One way to get a ballpark figure is to look at your current monthly income. Usually, the recommendation is to keep your total housing costs under 28% of your monthly income. If you have other debts, such as student loans or a car payment, your total debt payments — including your new mortgage — shouldn’t be more than 36% of your monthly income.
Knowing how much you can afford before you start looking at houses can help you avoid looking at properties that are out of your budget. It also gives you an idea of what will realistically work with your budget and help you make other financial plans around your mortgage payment.
We may be living in a digital age, but the home buying process is going to lead to a lot of paperwork. When you apply for a mortgage, you’ll have to show the lender proof of income, proof of employment, bank and investment statements, photo ID, list of debts and other liabilities and more.
To keep everything in order and all in one place, you might want to create a folder for all of the documents associated with your mortgage and the home buying process.
When calculating the costs of homeownership, look beyond your monthly mortgage principal and interest payments to get an idea of what your total payments will be. Depending on how much you put down, you might also have to pay private mortgage insurance. Another expense to take into account when buying a home is the cost of closing. Closing costs change frequently, so it’s a good idea to speak with your real estate agent or mortgage consultant at the start of the process to get an idea of what they might be.
Also part of the cost of owning a home is homeowner’s insurance premiums and property tax. Philadelphia offers a 10-year tax abatement for new construction and rehabbed properties. If you buy new construction, you only need to pay tax on the value of the land, not the value of the building, for 10 years. In the case of rehabbed homes, you don’t pay property tax on the value of the improvements for 10 years. The tax abatement can help to lower your tax bill and monthly housing payments considerably.
Once you own your home, you’ll want to keep it in good shape so its value continues to increase. Saving enough to pay for any problems that might come up after you’ve purchased your home will help to make it easier to maintain. You might consider getting a home warranty to protect your home and your wallet. Streamline offers a one-year builder’s warranty, for example.
If you’re particularly concerned about the cost of repairs or upkeep on your home, keep in mind that new construction typically needs fewer repairs compared to some of Philly’s older homes.
In a sellers’ market, when there is a lot of demand for houses and low housing inventory, a buyer who stands out is going to be more likely to land a home than one who doesn’t.
What can you do to make yourself stand out when buying your first home? Before you start looking at homes, you can make sure your credit score is excellent and that you have a stellar credit history. Having excellent credit can reassure the seller that your financing is less likely to fall through at the last minute.
You can also stand out by making a sizeable down payment. If you can afford it, putting 20% down will send the seller the message that you are serious about buying and that you have the financial ability to do so.
Some buyers also have good luck writing letters to the seller of the house. A letter brings a personal touch to what is otherwise an impersonal process. It can be the detail that makes a seller pick your offer over others.
Once you’ve gotten your financial details hammered out, it’s time to start looking at homes in earnest. You might already have a few properties you’re interested in, or you might be looking in a particular area. Or it could be that you’re entirely new to a city and have no idea what each neighborhood is like.
The home’s location is a critical factor. The price of homes near yours can influence how much your house will appreciate over time. The conditions of homes near yours can also affect your home’s long-term value.
The features and amenities of a neighborhood can also make it an attractive place to live. Think about what you want to have within walking distance of your house. Do you need to be near restaurants and cafes? Do you want to be able to walk to the supermarket?
If you own a car, find out about parking in the area. Will you need a permit to park on the street or does your new home come with a garage or parking space?
Make Philadelphia Your Home
The Bankrate survey found that about 12% of homeowners regret buying a house that was too small. When looking at homes, think long and hard about how much space you need. If you have children or plan to soon, you want a house that has at least one bedroom for them. If you or your partner work from home, it’s vital that you have an area in the home that’s suitable for work.
It’s also possible to buy a house that’s too big. If you and your partner are looking at a four-bedroom home, ask yourself if you need all those bedrooms. A bigger house means more to clean and furnish and often means a higher price tag. You don’t want to feel like you’re struggling to pay your mortgage each month for a house that’s more than you need.
Along with finding the right size house, it’s essential to buy a home that has all the features you need and at least some of the features you want. Make a list of what you want in a home. Include every possible thing you’d like to have in your home. It doesn’t matter how unrealistic your list is. If you think of it, add it, even if it’s something like an in-ground pool even though you’re planning on moving to Northern Liberties or South Philadelphia.
Things to include on your list are:
It’s also a good idea to consider your must-haves and wants when it comes to the location of the home. Think about how far you can be from work, if you wish to be close to a hospital or not, what schools you want nearby and how close you want to be to major highways.
Curious about what the top millennial housing preferences are? Being located in an urban area is a big draw for many millennials. Urban areas might have fewer homes available compared to the suburbs or rural areas, but they also tend to be closer to job opportunities and to have more amenities, compared to their suburban and rural counterparts.
Schedule a home inspection, even if you’re buying new construction. Even if the home is in excellent condition, the home inspection will still be valuable. You can think of it as a crash-course in homeownership. As the inspector moves through the house, they can give you tips and pointers on how to maintain the property and keep the house in great shape. They are likely to recommend a schedule for routine maintenance and give you advice on caring for your new home.
If they do turn up anything alarming or concerning, you can usually go back to the seller and try to negotiate. You might convince the seller to pay for repairs or drop the price, or you might decide that the extra maintenance or costs aren’t worth it and back out of the deal.
In some cases, it’s not worth writing a home off because you don’t like a particular feature. Some things are easy to change about a house, particularly if it is still under construction. Paint colors, bathroom fixtures and flooring options are all relatively quick fixes. Adding a new bathroom or converting an area to an open floor plan are considerably more involved and might not be worth the extra cost if the home you’re looking at doesn’t have them.
When people list their homes for sale, the sellers usually work with a selling agent. The selling agent then markets the home, helps the sellers set a price and communicates with their clients about any offers that come in. A seller’s agent also helps the sellers negotiate with buyers and can recommend when to accept an offer or when to make a counter-offer. The selling agent also usually has the full details on the home and a seller’s reasons for listing it.
In many cases, it can make sense for a person looking to buy a home to work directly with the selling agent, rather than bring on a separate buyer’s agent. When you work with the selling agent, you cut out the middle man and have a more direct line of communication with the seller. When you put in an offer on a home, you don’t have to wait for your agent to contact the seller’s agent, then the seller’s agent to contact their clients. Instead, your agent contacts the sellers right away. In a hot housing market, streamlined communication between buyers and sellers can mean the difference between an offer that’s seen and accepted and one that’s missed.
Streamline is a Philadelphia-based and technology-focused real estate company. We put customer service first and introduced the Streamline Experience, virtual reality home design services that immerse buyers in the construction, design and development process. If you’re ready to find your dream home, contact us today to learn more.