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Millennials, the first generation to grow up with the internet, are well known for their progressive values, purpose-driven aspirations, and nostalgia for AIM. But that doesn’t mean they had it easy. Between recessions, pandemics, and natural disasters, some consider millennials to be the “unluckiest generation,” with many buying their first home much later than previous generations.
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If you’re a millennial ready to buy your first home but aren’t sure where to start, don’t worry. GOBankingRates spoke to a reputable real estate agent who offered tips for first-time homebuyers to help millennials find the best deals and avoid common pitfalls along the way.
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Clarify the “Purchase Box”
The first steps can feel daunting, but Ryan Dossey, real estate agent and co-founder of Soldfast, recommends figuring out exactly what you want in a home and staying true to those standards. That’s why we recommend it. For example, he asks clients to figure out how many beds and baths they need, how much square footage they’re looking for, and whether they want a garden or garage (and if so, how big). What is your maximum budget and what is your preferred zip code?
“Just by limiting their choices to what[millennials]really want, they can reduce their chances of being overwhelmed by Zillow or ending up in poverty,” Dossey said.
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Deciding how you plan to use your real estate as part of your estate plan
Clarifying how a potential purchase fits into their financial goals can help new home buyers determine whether their purchase will serve as more than just a place to live. “Are you planning on selling this home when you move, or renting it out as passive income?” advises real estate agent Brad Byrne of Baird & Warner.
Some communities have rental restrictions that may affect your search criteria. Dossey added that given today’s cost of living, it has become common to even “house hack” a first home to cut down on overhead costs. “Buy a duplex, triplex or quad and lease the other units. A more luxurious version is to buy a home with an ADU and do the same thing,” Dossey advised.
Levi Rogers, real estate agent and co-founder of VA Loan Network, advised always thinking long-term, even with a starter home. “Consider the resale value and growth potential of the neighborhood (…) and consider future development of the area,” he advised.
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Budget for unexpected costs
When budgeting, it’s important to delay the instant gratification of an Instagram-worthy home and instead save for a rainy day. Dossey recommends not maxing out pre-approvals as there is still plenty of room for unexpected costs. These include everything from repairs and upgrades to increases in taxes and insurance premiums.
Omar Reiner, a real estate agent and president of FL Cash Home Buyers LLC, suggested a strategy: figure out what 28% of your income is and base your search on properties priced in that range. If you look around primarily based on what a lender will give you, you could be setting yourself up for disaster.
“I tell all my clients that their first home shouldn’t be a flop, and it’s likely not going to be as nice as the home they grew up in,” Dossey said. “It took our parents decades to get to where most of us think we should start in the first place.” It’s wise.
Thoroughly research your financing options
“Most millennials will consider an FHA (Federal Housing Administration) loan, which allows them to live in a home for as little as 3.5% off,” Dossey said. Unfortunately, with an FHA loan, you are locked into PMI (private mortgage insurance) for the life of the loan. This serves to protect the lender if the buyer stops making payments, but it also means that the buyer may end up paying more over the life of the loan when compared to other conventional loans. means. This is why Mr. Rogers encourages considering all options and says, “I’ve seen buyers save thousands of dollars by shopping around for the right lender.” As an example, it is possible for veterans to qualify for a VA home loan.
Finally, Reiner recommended always doing your due diligence when looking for the best interest rate that balances your loan terms. Because, again, “the longer you pay off your mortgage, the more likely you are to pay over the life of the loan.”
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This article originally appeared on GOBankingRates.com: I’m a Realtor: 4 First-Time Home Buyer Tips for Millennials
