All is not bleak in the light of the COVID-19 pandemic. Mortgage rates are at its all-time low since the ’70s, said Freddie Mac, and housing prices have significantly lowered during the past months. Right now may seem like the best time for millennials to grab the opportunity and buy their first homes. But even with this data, only about 20 percent of millennials are ready to make their first home purchase.
Are Millennials Wasteful Spenders?
Like any generation before and after them, millennials see homeownership as an essential element of achieving the American Dream. Despite the stereotype that this heedless never-grow-up bunch spends wantonly on experience, avocado toast, and Instagram likes, millennials are keen on savings and prudent in making major financial decisions.
The millennial generation is defined as the generation who gets married later, who buys lesser cars, and who live with roommates longer. That is without reason, though. Millennials are practically conditioned to avoid any risk their whole lives, especially financial risks. As compared to their parents, who are either boomers or gen X-ers, this generation is less economically well-positioned.
In saving up to buy their first homes, millennials resort to creative tactics to come up with down payment money and closing costs. Strategies vary from moving in with family members to cut costs, drawing on their retirement funds, and even selling personal items. As compared with other generations, millennials are more eager to exhaust all their resources to fund their first home purchase.
Challenges First-Time Millennial Homebuyers Face
When the Great Recession hit the global community, a large portion of the millennial bloc saw it with their eyes as colleagues or themselves, or even their parents lost jobs and homes. Such an experience blighted their collective psyche, making them distrustful of financial institutions, mortgage lenders, and regulatory agencies. Even now, millennials haven’t quite gotten over this.
Aside from the fact that millennials, on the average, earn 20 percent less compared to their parents when they were at the same age, transitioning to adulthood during the period of economic turmoil made living more expensive. With things to consider like bills for health concerns, moving expenses, home repairs, or other significant overheads, everything suddenly seems overwhelming for a generation that has good reasons why they cannot save enough.
Although several insurance coverages could potentially protect anyone from exhausting one’s hard-earned savings, millennials still feel they are not ready enough to make big financial decisions, such as buying a house. Furthermore, facing surmounting student loan debts, expensive housing costs, and stagnant wages, millennials are afraid to take on optional debts, even if it is a smart long-term financial move.
Millennials want to feel they are genuinely financially secured before making the big purchase. Even if it means a few years or a decade, millennials want to prove that they are stable enough. That goes along with other significant life decisions, such as having kids and getting married.
Helpful Tips in Buying Your First Home: A Millennial’s Guide
Millennials have revolutionized the real estate market the same way they are changing other industries. First-time millennial homebuyers have lots of demands, including open floor plans, large windows with blind covers, and move-in ready houses. Millennials want to get the value out of their money’s worth.
But before going on housing details, if you are a millennial on the fence, whether you grab this opportune real estate situation right now or withhold for another few years, consider these following pointers to guide you in successfully navigating your first home purchase.
Assess the Cost
Before saying yes to your dream house, take a few steps back, and review how much you can afford. Being realistic with your financial resources will give you clarity and ease in landing the right house. Factor in not only the purchase price of the property and closing costs but also other expenses such as insurance, taxes, and maintenance.
Save up for Down Payment and Closing Cost
What most first-time homebuyers do not understand is that putting a bigger down payment can significantly help reduce costs. Other than that, at least paying 20 percent of the purchase price helps you avoid the need to buy mortgage insurance.
Find a Suitable Financing Option
Finally, finding a credible mortgage lender who can give you the best mortgage rate is a priority. Work with a mortgage broker who can show you meaningful insights and strategies in navigating your home purchase.
As the millennial generation is aging, they now make up the largest cohort of homebuyers. The many years of financial challenges the millennials faced only made them wiser and more prepared in making major life decisions, such as buying a home.