Home Ownership- Part One
In school we are taught a lot of things. Early on, it’s shapes, numbers, and letters. Eventually you move on to multiplication tables, fractions, how to build sentences. By the time you reach high school, you are studying foreign languages, algebra, human anatomy and biology, and how the United States became what it is today. Moving on to college or the job market, you expound on those ideas as you begin to hone in on what your next thirty to fifty years are going to look like. Unless you are a finance major or business major in general, there is a major hole in our education that many people never get help from unless it comes from their parental figures- money. How to budget. How to save. How to spend in a smart fashion. Most of us enter the work force with debt, whether that be credit cards, student loans, a vehicle etc. and we don’t have habitual skills pertaining to paying for things. This then creates an effect of millennials renting for a longer period of time before being able to purchase. I want to give some tips to do a couple things: 1. Insulate yourself from unnecessary debts that will hinder your purchasing power and 2. Put yourself in the best possible situation to purchase your first home.
Studies show that 36% of home purchases made in 2017 have been done so by a millennial (born between ’81-96), and 60% of them are first time homebuyers. Which means that this age group is now the largest portion of yearly home sales in America. The benefit of this is that many lenders are beginning to generate loan programs that gravitate towards helping millennials, whether that be 100% loan programs, down-payment assistance, student loan specific programs. All of these are recent additions to a lot of lender program profiles. However, millennials are still buying five years later than when their parents purchased their first home. Main reasons being, our debts are more than our parents were before buying, and we are more pinpoint focused on what we’re searching for. As recent as 2015, 55% of people aged 25-34 are living with parents or relatives. Yikes. My job as an agent, and goal more than anything, is to educate, prepare, and execute the home buying or home selling process for everyone that I possibly can. I’m going to go through some helpful ways to put yourself in a prime position to purchase sooner than your peers, because, in my opinion, the main thing that home studies are currently showing is that it is going to be like a Wal-Mart on Black Friday in southern Alabama in about five years when all of the millennials enter the market.
First, if you come out of school with student loans, it’s becoming less of a big deal. As mentioned before, lenders are scrambling to create programs tailored to debtors. You can get subsidized payments or deferred all-together until you reach a certain level of income. However, the most important thing you can do post college, is to find a job that allows you to comfortably pay for your loans. One thing I see too often, and saw a lot when I was looking at credit profiles all of the time, is that people don’t put themselves in positions to succeed because they take a job for too little money. You can’t take a job for $40,000 ($3,333 a month), have a $600 student loan monthly bill, and expect to be in the market for a $300,000 home. However, if you find a job that pays you $55,000 ($4,583/month) with that same monthly debt, you can come in to the market with a lot more buying power. Thankfully, the job market is cruising right now, and I think that mainly benefits young people with specified skill sets entering the workforce.
In college, I was shocked at the amount of people that had unlimited access to their parents credit cards. I would go out to dinner, eat a meal that was hopefully cheap, and then pull out my debit card for my bank account that usually sat at around $50 basically until my junior year when I started working full time along with school. Meanwhile, my friend that didn’t have to work throughout school, whips out mom or dad’s card and doesn’t even look at their bill for accuracy. After college, they get their own card once they get a job and get some buying power, and treat it the same way they did their parents’. Come twenty-five, and they’re then having to worry about making the payments on these massive credit card bills. This goes back to financial responsibility. One thing that I was always taught, especially when I got to the age that I began paying for my own life, is to only pay for things on a card that you could actually pay for in cash if you needed to. This rule will allow you to one, keeps your bill manageable, and two, habitually force yourself to stay within your means responsibly. You don’t want to go to a lender all excited because you have a great job, no student loans, and are ready to buy a house only to not be able to purchase what you want because of credit card debt. It’s the one credit situation that you have complete control of.
Another facet of buying power is the ol’ fashioned job change. As someone with recent experience of this, it’s becoming more and more common for young people to spend the first 5-10 years of their time in the workforce doing an array of jobs to see where they feel most comfortable. This isn’t something that the majority of our parents did, so it’s an adjustment for everyone. In my opinion, if you’re at a job right now that you don’t enjoy, don’t find meaningful, or don’t feel like you will have the best possible opportunities for growth and advancement, leave. There are so many new professions to choose from right now as well as ones that are constantly growing that you don’t need to waste your time if you feel like you are in a bad fit. If you’re looking to purchase a home in the next year, DO NOT become a realtor (obviously) but you should think about where you want to be in the market pertaining to purchase price when you’re considering a job change.
Alright, you have your income figured out and you’re at a spot where you can begin to think about saving up for a home. The next step is to find a realtor that you trust (me) and begin honing in on what you’re wanting to do with your investment. Where do you want to live? What’s the purchase price you feel comfortable with? Do you want a big lot, or would you prefer something that is more urban with better walkability? With these parameters set, you can begin to search for specific properties that meet those criteria. With that in mind, when houses come on the market inside of your wants or needs, you begin to find things that you like in each house. You’ll begin to notice the layouts of the living room, the size of master closets, even down to the hardware you want on kitchen cabinets. These are all things that help narrow down what you want before you go and spend time going through specific houses.
At this point, you’re now ready to begin really looking and going through the home viewing process. In my opinion, it’s important to create narrow desires and wants at this point. Both you and your agent do not want to have to be bogged down with checking out twenty houses in person before you really get a feel for what you’re actually looking for in a home. That’s for the sake of both of your sanities. Once you find the perfect place and you’re set and ready to make an offer, it’s crunch time, and time for the value of your agent (me) to really pay off. Next week I’ll discuss the actual contract process and how to set yourself up to win the deal and get in to your new home.