Buying a home for the first time? Here are some things to consider
May 20, 2015
As millennials occupy a largely different economic market than their parents, different factors need to be taken into consideration. Here is a glance at some of the financial issues that millennial first time homebuyers have to consider:
Student Loan Debt
Millennials carry more student loan debt than any generation previous, meaning that obtaining the down payment to purchase a home for the first time requires a little more creativity. Taking advantage of offers and programs offering special mortgage rates for first time homebuyers is a good idea.
Risk Management/Cash on Hand/Retirement
As tempting as it may be to purchase a home that pushes the boundaries of affordability, remember there are many reasons not to. You never know when you’ll need some type of buffer on your monthly income, requiring you to have some cash on hand. Repairs, taxes, insurances, and closing costs can easily consume large amounts of money quickly. Also remember that as significant as it is to own equity in a home, saving for the future is important as well.
Children and School Districts
Just because children may not be on the foreseeable radar doesn’t mean you won’t ever want them. Life often moves very quickly, making disregard things like local neighborhood safety or school district zonings more important than imagined while single. As millennials grow older and start having children, housing locations with better schools may prove more desirable, making those locations a potentially better investment.
Flipping & Investment Property
Millennials are selling houses far more quickly and often than previous generations. This could come from a diverse range of causes. For example: a first-time home purchase may be quickly outgrown by a growing family. Millennials are also often looking for investment opportunities, shifting their assets to more ideally prepare for future growth.
Cash-Only and Foreign Buyers
The current generation of homebuyers has a new challenge when looking to purchase a home – a large number of foreign investors are purchasing property strictly with cash, making for an enticing offer to many sellers. It’s something to be aware of when making bids, and as certain areas will be much hotter with foreign buyers than others, real estate agents become a valuable asset in the home buying process.
Since millennials do tend to live in more urban areas, keep in mind that many apartment complexes and condominiums require HOA fees, or Homeowner’s Association fees. These payments will be on top of your mortgage payments and are often in the range of a few hundred dollars a month. The fees depend on what services are covered, and may be assessed per square foot.
A variety of specialty programs exist to help first time homebuyers. These programs, offering anywhere from 3.5% to 10% down, can be a powerful dealmaker to many first time buyers. In addition, first time homebuyers can often write off the interest on their home loans when filing income taxes. As the majority of the first few years of payments are largely paying off interest rather than principle, this can have a striking effect on one’s financial health.
Talk to your licensed mortgage advisor about your options, and look up any specialty programs offered in your area, including FHA mortgage loans, jumbo mortgage loans, VA mortgage loans, interest-only mortgage loans and investment mortgage loan opportunities.
Angel Oak Focus on Millennials Series
As millennials come of age and begin looking to buy homes for the first time, they are confronted with intricacies in the mortgage process that didn’t even exist when their parents first bought their own homes. As the housing market heats up again and millennials find age-old home buying guides irrelevant, Angel Oak Home Loans seeks to guide prospective homebuyers in navigating the complex world of mortgages through this series, focusing on educating the first time home buyers to make it an easy and simple process.