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Buying a home is one of the biggest purchases most people will make.
There are many things millennials must consider when buying a home, like speaking with a mortgage broker rather than relying on real estate websites, finding an inspector, and sticking to a budget.
After a year and a half of searching, my partner and I finally bought a house, though there are a number of things I wish we had known before starting the process.
I've always thought buying a house was a milestone I would reach by 30. I'd own that perfect, stately colonial on a beautiful tree-lined street in a nice suburban town.
I'm turning 30 this year, and the search for my perfect home has been complicated beyond measure, with the foremost obstacle being affordability. It turns out I'm not alone among people of my generation - according to CNBC, a growing number of millennials are struggling to save any money at all, nevermind enough for a down payment.
And it doesn't help that, as of 2018, US home prices are the least affordable since 2008, according to Attom Data Solutions.
I live in New Jersey, and looking for a home in a town with a good school district that's within a reasonable commuting distance to New York City is a tall order at any budget. According to the 2019 Best School Districts in New Jersey list from Niche, only a handful of towns within a 30-40 mile radius of NYC rank in the top 25 school districts. When you cross reference that list with the average sales price of homes in the area, affordability plummets.
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After a year and a half of searching through half a dozen New Jersey towns, my husband and I are finally ready to close on our first home.
As a millennial, here's what I learned about buying a house that I wish I knew when I started the process.
1. Review your finances and talk with a mortgage broker before you start hunting
With websites like Zillow just a click away, it's easy to start shopping for a house immediately. But it can be helpful to get realistic by reviewing your finances and your credit score and talking with a mortgage broker first to see what you can actually afford with your income and lifestyle.
I became self-employed about a year before my husband and I started looking for a house, but our lender required that I have two years of self-employment before we could use my income for our mortgage. This meant we would be reliant on a single income to look for a home, which didn’t allow us to afford the towns we were looking to purchase in.
Our broker's advice at this point was invaluable, and while we could have purchased something, we decided to wait until we had a better story to tell through our finances. The numbers are the numbers, and we appreciated the candid conversations and wouldn't have known to wait had we not had a reputable mortgage broker to talk with.
2. Check your credit score
When you want to buy a home, your credit score is more important than ever. Sites like Credit Karma offer lets you see where you stand for free.
This way, you'll know if there's anything wild on your credit report, like a fraudulent credit card or outstanding utility bills from an old apartment, that you weren't aware of. These are things you should address before moving forward in your search.
3. Go to as many open houses as possible
We saw nearly a hundred homes, both with and without our agent. Every weekend, we would drive out of the city and hop from one open house to another.
Zillow is a great resource for finding potential homes, but until you see a house in person, you may not know if it's the right fit. For instance, a number of homes we viewed were seemingly perfect online but completely disappointing in person.
Lastly, you never know what you'll fall in love with — our new home was one of those open houses that we ended up visiting but perhaps wouldn’t have gone to see with our agent because it was priced outside of our budget.
It was only after visiting and talking with the agent that we were compelled to make an offer we were comfortable with. We wouldn’t have wanted to waste our agent's time, but were totally fine doing the legwork on our own.
4. Inspections are crucial, and will surprise you
A few months ago, we were in contract on a home that we loved. The house needed work, but we were committed to renovating once we closed.
That is until we received an inspection report with 100 pages of issues we needed to fix before we even started to talk about what we wanted to do with the home. We asked the sellers to address the issues but we couldn’t compromise, so the deal fell through.
While some of our requests sounded remedial, like grinding out a termite-infested stump in the front yard and fixing railings outside of the home, the laundry list of issues left us uncertain about how the home was cared for. You want an inspector, and you want a good one.
5. You can — and should — bring your contractor on the home search
If you're thinking about renovating or doing work to a home, it's a good idea to find a local contractor who won't mind visiting a home or two that you're serious about.
Bringing them along and asking for a quote will help you to know for sure if the renovations the home needs are financially feasible for you and what your timeline might look like for the amount of work it will take.
This way, you can make an educated offer that factors in the cost of renovation.
6. You'll be tempted to go over — but stick to your budget
Many times I found myself wanting to go over budget in our search for a home. "It's only $30,000 over budget," I would think about a house, before my reasoning would kick in and remind me that we just couldn't afford it.
Try not to get into the habit of looking at houses beyond your budget. But if a home is on the market for long enough, and you love it, it may be worth making an offer.
The sellers could be motivated to close, and if you're a good buyer offering them terms they like, then you might just have an opportunity to get in there for a steal.
We would always patrol what was sitting for a few months and watch some favorites to see if there were price adjustments. This way, we were ready to pounce if a house came within our budget. When negotiating, always keep your number in mind and stay there.
7. A quick close is absolutely your best friend
If there's one time in your life when it's time to get your act together and do things quickly, it's when you're a renter buying your first home (with no property to sell).
This strategy worked to our advantage, as some sellers prefer a quick close so there's less time for problems like cold feet or mortgage delays. Our lender was able to commit to getting all of the financials done within 30 days, and this was a key figure in securing our deal.
If you have the ability to close quickly, emphasize that in your offer to your sellers, but also note that you are 100% flexible to their timeline. After all, if they have nowhere to go, they won’t want to hand over the keys in a month.
8. General rules of thumb
Throughout the process, we learned a couple of rules of thumbs that helped to keep our process successful: Get things in writing in case things get confusing, everything is negotiable, and be patient.
We learned to be flexible where we felt comfortable, and stand strong where we didn't. This held true for negotiating with sellers, and the costs for attorneys, inspectors, home insurance and even mortgage rates, which are at times negotiable. And of course, to be patient. The right house will come along. A house is only worth what it's worth to you.
