Millennials and The First Home Purchase: 5 Ways to Prepare

Millennials and The First Home Purchase

We know that in many cases millennials are waiting longer to settle down than previous generations to make their first home purchase. However, as the job and housing markets improve and the recession becomes a thing of the past, we are starting to see millennials, ages 24-35, step into the home-buying demographic.

The National Association of Realtors cited that, of first-time home buyers, millennials have accounted for 67% of buyers. This is a growing number in recent years and suggests that this generation is starting to feel more confident and motivated to buy a home.

According to a study by Choice Home Warranty in 2015, 30% of millennials anticipate buying a home in the next 5 years. Most of that group is on the upper end of the age bracket, with the average age being 30 years old.

As millennials prepare for what will be one of the largest purchases they may make in a lifetime, it’s important to start preparing for this endeavor properly.

5 Ways to Prepare for a Future Home Purchase

Prepare for The Costs Involved

In most cases, a home buyer should anticipate paying a 20% down payment on a home. The average home purchased in 2015 was around $187,000 for millennials and $220,000 overall. That’s an assumed down payment of $37,000-$44,000.

You’ll also need to account for other costs that you may not know to prepare for upfront. There are fees associated with loan applications, inspections, appraisals, in addition to paying taxes and additional costs for moving such as homeowner’s fees and fees for movers and moving trucks.

Understand How to Increase Your Credit Score

First things first – check your credit. If your credit isn’t great, you might need to think about ways to raise your score. Be sure to pay your bills on time, make more than the minimum payment, and get all of your finances in order. Often, people will open a new line of credit to improve their score. But if you’re planning to buy a house in less than 2 years, getting a new credit card can actually negatively affect your credit score.

Save & Invest Wisely

Make sure to save in addition to saving for the house. That ensures you have a safety net to fall back onto after purchasing the house. If you deplete your entire savings, you are vulnerable to emergencies or unplanned expenses.

If you have investments, you’ll want to make decisions based on the time frame in which you plan on buying a house. If you’re waiting over two years to make a home purchase, talk to a financial advisor about high risk investments for a good return, but also giving you time to recover if an investment drops. Around two years out before buying, you’ll want to make more conservative investments to assure your money is safe.

Visualize Your Future Plans

This is the part where I ask your 5-year, 10-year and 30-year plan. Do you know what your life will look like for the entirety of your mortgage? If not, that’s fine! However, it’s important to make some long-term decisions before signing the papers.

One of the main considerations is location. Do you plan on staying in the area for the next few years? If you have ambitions to relocate, then consider the options for renting or selling. Ask yourself if these are viable solutions for the property and for you.

Another consideration is job and income security. No one plans to quit or become unemployed unexpectedly, but it’s wise to prepare for unforeseen circumstances. If you and a partner plan on having kids, you’ll need to discuss what career and salary implications that may have and how that will affect your mortgage.

Are there any other large expenses planned? Do you plan on buying a car? Do you anticipate home improvements or repairs that could be costly? Are there any health issues that you need to resolve? Try to anticipate any large costs that you may incur.

Set Your Goal and Get excited!

Buying a home can be one of the biggest and most rewarding events in a person’s life. Yes, there are a lot of responsibilities and costs that come with owning a home, but remember to take command of your home buying experience and do not let yourself get stressed or pressured into decisions.

If you would like to speak to experienced mortgage professionals about first-time home buying, give us a call at 781-232-8000 today.

Poli Mortgage Group is a Division of radius financial group inc. Corporate NMLS #1846. radius financial group inc. is an Equal Housing Lender. Poli Mortgage Group is licensed in CT, FL, ME, MA, NH. For more licensing information please visit: https://polimortgage.com/licenses/ or by visiting www.nmlsconsumeraccess.org. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs rates, terms and conditions are subject to change and are subject to borrower qualification. This is not a commitment to lend. The content in this website has not been approved, reviewed, sponsored or endorsed by any department or government agency.

* This radius Pre-Approval/Credit Commitment Promise Contract ("Promise") is made and entered into, as of the date of the last signature below, by and between radius financial group inc. ("radius" or "Lender"), and the below-named Buyer and Seller. In consideration of Seller's reliance on this Promise in entering into a real estate purchase transaction with Buyer, the Parties agree as follows:

PROMISE TO SELLER. In the event that a Seller is induced to accept an offer from, and enter into a purchase and sale agreement with, a radius borrower on account of this Promise in connection either with (a) a radius Pre-Approval or (b) a radius Credit Commitment and the Buyer is unable to close on such Eligible Transaction due to a mistake made by radius (with accurate and up-to-date information) on such Pre-Approval/Credit Commitment (a "Bad Pre-Approval"), then radius shall pay Seller ten thousand dollars ($10,000), subject to the terms and conditions herein as Seller's sole remedy.

PROMISE TO BUYER. In the event that radius issues a Bad Pre-Approval to Buyer on an Eligible Transaction, radius will reimburse Buyer reliance expenses up to one thousand dollars ($1,000) for a home inspection, appraisal, or legal expenses actually paid out-of-pocket by Buyer, subject to the terms and conditions herein. This payment shall be Buyer's sole remedy.

ELIGIBLE TRANSACTION. For purposes of this Promise, an "Eligible Transaction" is a purchase money mortgage transaction for a primary residence (made on or after April 1, 2018) (not made to a radius employee or immediate family member), provided that the loan is a Conventional, USDA, VA, or FHA loan product for either (i) an existing home resale or (ii) a newly constructed home that is to be delivered and closed within ninety (90) days of the P&S.

CONDITIONS. The applicable radius Pre-Approval must not have expired prior to the date of the P&S. Offers/P&Ss cancelled due to home inspection issues or title defects are not covered under this Promise, and this Promise is void if a Bad PreApproval is the result of: (i) a change in Buyer's financial position, (ii) property specific requirements or expenses (e.g. homeowner's association dues/fees, flood insurance, or property taxes), or (iii) loan product availability or underwriting requirements, or third-party actions outside of radius' control.

FUNDS DISBURSEMENT. Any funds due and payable under this Promise will be paid if requested by Buyer or Seller in writing within 90 days of the date of an applicable Adverse Action Notice and accompanied by a fully-executed copy of this Promise. Any payments made under this Promise will be reported to the Internal Revenue Service by radius on a Form 1099-MISC or as otherwise required by then-applicable law. Please consult your tax advisor for any tax implications.

Millennials and The First Home Purchase: 5 Ways to Prepare

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