By Mazen Fawaz
Learn more about Mazen on NerdWallet’s Ask an Advisor
Millennials are known for challenging traditions, and homebuying is no exception. Whether it’s buying later or opting for handyman specials in newly revitalized communities, they’re exploring new ways of achieving the American Dream. But there are some best practices to keep in mind no matter where or when you buy.
Here are some essential tips if you’re a millennial forging your own path to homeownership.
Millennials are approaching homebuying differently from previous generations, often venturing into property ownership later than their parents did. Waiting can make sense if, for example, you see yourself chasing a career opportunity in a new city in the near future or are harboring a dream of traveling abroad for two years. But if you’re in your early 20s, financially stable and see yourself staying put for the next five to seven years, it’s often a smart idea to find a starter home and make the investment. Buying allows you to begin building equity and take advantage of tax deductions on mortgage interest, among other benefits.
Define your motive
Are you looking for a small home that fits just you? Or do you see yourself having a family sooner than later? These questions will help you buy the right amount of house. Are you looking for an investment property? Remember that you’ll need extra cash for maintenance and improvements. These funds will eventually turn into equity, but you won’t see that profit until you sell the home some years down the road.
Make sure you can afford it
Outside of the red-hot, unaffordable real estate markets such as San Francisco and New York City that tend to be popular with recent college graduates, you might pay less for a mortgage than you would for rent. If you’re a millennial living in a city where homeownership is within reach, remember that there are other expenses to budget for when buying a home. Use an online calculator to run the numbers on your down payment amount, closing costs, the amount you’re financing and your credit score. And don’t forget ongoing expenses, such as taxes, homeowners insurance and repairs. All of these figures affect whether or not you can afford to buy a home.
Work with a qualified real estate agent
You might be used to having a wealth of information at your fingertips, but experience has plenty to teach you about the homebuying process. Do yourself a favor and find a real estate agent you can trust. The agent will use his or her knowledge to help you navigate the complexities of financing and the nuances of a property purchase. This is not a road you want to travel alone.
Take your time finding a home
Once you’ve cleared financial hurdles and are officially on the hunt, don’t rush. Look at as many properties as you need to find the right one, both for today and in the near future. Avoid emotional attachments and don’t get into bidding wars with other house hunters. As a younger homebuyer, keep in mind that there will always be another house. It’s better to let a few slip through your fingers before you find “the one” than be stuck with something you jumped on too early.
Don’t bypass your inspection
Younger buyers tend to be more eager to take on home improvement tasks themselves, and addressing smaller cosmetic issues yourself is a great way to save money. You might think you’re ready to channel your inner Chip and Joanna Gaines and give your home the HGTV treatment, but unless you have extensive experience, you probably can’t fix a roof or take down walls to deal with mold.
Home inspections are your safeguard against buying a money pit. Hold the seller accountable for necessary repairs before signing on the dotted line. A great real estate agent can help guide you through the process.
Choose your neighborhood wisely
Find an area that fits your lifestyle. If you’re a social butterfly, opt for a neighborhood with a vibrant social or music scene. If you’re a busy young professional, then a quiet condo might be a perfect fit. If your purchase is an investment property best suited for a family, aim to buy in a great school district. Just remember that you’re not just buying a home, you’re buying a neighborhood.
Keep these factors in mind, and you’ll land in a place you love.