Millennials Redefining Homeownership
June 26, 2017
It never ceases to amaze me how surprised people are when I tell them that I’m both unmarried and own a home. For people in their early to mid 20’s like myself, renting is the norm and home ownership is the exception. Just out of college, with student loans and entry-level earnings that can make it difficult to save for a house as an apartment dweller, NerdWallet found in a recent study that one reason millennials aren’t buying homes at the pace of previous generations is a perception that they can’t afford to own.
In my personal opinion, another one of the main reasons for not buying young is that millennials wait until marriage, because at that point, they likely have a better idea of where they want to live and/or have more stability in the workplace. The second is that they value low-key, low-maintenance lifestyles. Home ownership often doesn’t fit this value point.
Demographics Don't Matter
I am in a rather unique position compared to the average 24 year old. I have lived with my longtime boyfriend since I graduated from James Madison University in 2015. Re-location for us wasn’t an option due to the fact that he works for his family business. In addition, my boyfriend, who’s 26, already owned a condo, and had lived there for two years prior to me moving in. We also earn a good living with our two full-time jobs, which currently allows us to enjoy a somewhat carefree lifestyle. We enjoy boating, have a dog, dine out most weekends, and don’t necessarily have to pinch pennies or worry about living paycheck to paycheck. We are aware of how truly fortunate we are to have such privileges at such young ages. However, I believe that the stresses of the home buying process affect us all, and it doesn’t matter what demographic you are.
So at the tender ages of 26 and 24, we determined that buying our first home together would be the best decision for us as a couple and a good investment in our shared future. For most people, and certainly for us, buying a home is the biggest purchase of our lives — and the process is as exhilarating as it is stressful. Credit scores, down payments, and mortgages are all on your mind, and the process is seriously daunting.
In fact, NerdWallet found that the majority of millennials would prefer owning to renting, but they appear to be postponing homeownership because of real and perceived difficulties in affording it. However, armed with the right information, you can shop for a house, apply for a mortgage, and close the deal with confidence, as we did. Here are a few of the lessons I learned while planning our first home purchase.
Prepare For The Mortgage Process
Twenty-somethings may have low (or no) credit, which means you’ll have a hard time getting approved for a mortgage. Your mortgage lender will likely consider both buyers’ credit scores in the application process. That’s not to say you’re necessarily doomed if one person’s credit isn’t as good, but don’t count on things going off without a hitch just because one buyer has a stellar score. This is exactly what happened to me and my boyfriend, as he has an almost-perfect credit score, and I didn’t have the forethought to build my credit history. It all ended up okay, and we were still pre-approved for a mortgage with a low interest rate, but this is just another reality you must be prepared to face to guarantee you're financially ready for a home.
Can We Really Afford This?
Of course owning your own home is the all American dream, but can you really afford all of the expenses that come with this dream? We had to sit and take a long, hard look at where we wanted to live and how we wanted to live to determine if these two aspects were feasible with our budget. For example, in our certain situation, we had to answer questions such as: “Do we have the money to put down at least a 20 percent down payment,” “Do we have room in our budget for potentially two mortgage payments if we do not get a renter for the condo,” and “Do we have the money for maintenance, repairs, furniture and other expenses that come with buying a home?” All of these formidable questions are almost enough to make you run for the hills and forgo the entire process. But determining the costs that should factor into your decision to buy a home, although a hard pill to swallow, is completely necessary if this is really what you want.
That Costs HOW Much?
To piggyback off of the last statement, I wish someone would have warned me that by the end of all of this (but does it really ever end?) you should expect to feel broke. It's surprising how quickly costs add up. Besides the down payment, there is the deposit, appraisal, inspection, attorney, movers, paying the agents, and paying the HOA fees of our new neighborhood. Not to mention we have to eventually paint and furnish this brand new home we just bought with what little money we have left over. It becomes a bit overwhelming when you sit down and think about how all of the small price tags eventually equal the biggest expenses of all. Fortunately, we bought this home knowing it would be something we would grow into over time. In the meantime, we have furniture from our previous home we can use, and our families are graciously helping us out with some of the costs. To help avoid some of the initial shock I experienced regarding all of the expenses, having extra cash set aside in the bank for situations like this is always a smart move.
Now, you may be thinking after reading this that anyone who willingly puts themselves in this situation is possibly certifiable. Trust me — during the home buying process my boyfriend and I have certainly had our moments when we thought, “What have we done?” But those fears have subsided, and instead have been replaced with excitement, motivation and gratitude. Knowing that once you leave work, you will be coming HOME to a house you OWN is one of the best feelings you can experience. There is a great sense of stability that comes with owning your own home — living in our neighborhood allows us and our family time to build long-lasting relationships within the community, as well as offering our future children the benefit of educational and social continuity.
There are many factors one must take into consideration when buying a home. One of the main lessons we learned is to be flexible, because just when you think you have it all figured out, think again. Our lives are constantly changing: nothing ever stays the same. However, the one thing that we know for certain is that the hard times won’t last forever — this applies to the home buying process as well. And in the end, we are thrilled with our purchase and know that this is definitely an investment that will pay off in more ways than one.