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5 Things Millennials Should Consider When Purchasing a New Home

5 Things Millennials Should Consider When Purchasing a New Home
The weather is warmer and signs of springtime are everywhere – including an increase of people looking to buy their first home. Millennials form a large portion of this first time home-buyer group.

This age group, born between the early 1980’sand early 2000’s, are settling down earlier and buying homes sooner as the economic situation improves.
After witnessing the effects of the burst of the housing bubble, Millennials feel cautious yet eager to take advantage of the current home prices and interest rates.

If you are a Millennial and find yourself considering purchasing your first home, here are five things that you should consider before taking this big (and exciting!) step in your life.

1. Know What You Can Afford
Making sure that you have enough capital to purchase a home is one of the most important criteria. Very few people can purchase the entire home up-front in cash (if you can, that’s great!); instead, you must finance the home. This could take some time, and might even take a visit or conversation with more than one lender.

Look realistically at your budget – consider the true cost of the home and if you can afford it. Your budget determines which homes you view, and you don’t want to miss out on your dream house because you’re unsure of your budget.

The true cost of the house includes: principle, interest, taxes, and insurance. The principle is the actual cost of the house that is divided amongst the payments.

The interest depends on the lender, and is added to the principle for the final cost of the loan. The mortgage rate will determine the amount of interest that you pay on the home – the rate depends on your personal finances, the lender and current market conditions. If your payment is less than 20% of the value of the home, you’ll have private mortgage insurance costs each month in addition to the homeowners’ insurance that you’ll need. Cost for homeowners’ insurance coverage depends on the home cost, credit risk and the age of the home.

Taxes vary from different areas in the county – they can depend on the cost of amenities in the town and on the quality of the schools.

2. Think Twice About Fixer-Uppers
It might seem like a great idea to get an inexpensive fixer-upper in a great neighborhood, but you need to be realistic. Consider the amount of time and budget that you have to give to home construction projects so that you don’t bite off more than you can chew.

Also, will you be able to live in the house while you’re renovating? Repairing and remodeling the kitchen may seem like a fun project to take on, but how long will you be without a kitchen sink if you’re working on it in your spare time?

If you cannot live in the house during the renovations, you’ll need to compare cost of alternative living arrangements until the repairs are done with the money you’re saving on the “great deal” you’re getting on the fixer-upper.

3. Embrace Compromise
Many people have a long wish list of items that they want in their new homes, but finding this perfect home with all of our desires might be an unattainable goal. We might want an outdoor pool and a large gourmet kitchen, but will this really be available in the neighborhood you want in your price range?

Sit down with a friend, partner, or spouse before visiting any potential homes and create a wish list of features you’d like to have. Then split your list into the absolutely necessary items and the ones that will be niceties. Rank the items on each list by priority.

Ultimately, you will need to compromise on some things in your first home. But as long as you have a solid idea of what is necessary for yourself, your partner, and/or your family, you will find a house that will work for everyone.

4. Narrow Down the Location
Location should top your wish list when it comes to criteria, as it’s the one thing about the house that is static. The more neighborhoods you look into, the more complex and confusing your home search will be. It’s hard to keep track of taxes, school districts, average home prices, and other neighborhood offerings if you have a long list of potential suburbs you’re considering.

Instead, narrow down the neighborhoods to two or three.

A good way to narrow down your list of neighborhoods is to tour each area at different times of the day and on different days. Does it seem safe? Are people walking with pets or strollers? Does it get quieter or louder after dark? Can you picture yourself living there? Talk to the people you see on the streets! They are a wealth of knowledge and information on the ins and outs of the specific neighborhood you are considering.

Also, school quality a top priority is wise. Even if you have no plans of children, a good school district will ensure that you can more easily sell your home in the future.

5. Find a quality Home Inspector
Having a quality inspector is just as important as having a quality realtor. A good home inspector can save you a fortune in repair costs down the road.

To find a quality inspector, check online reviews. If a specific inspector isn’t listed, it is a sign that he may not be very tech savvy – a red flag.

And don’t just go with the cheapest. As they say, you get what you pay for!

Next, have a phone call with him. Ask him to take photos and document everything that may need repairs and include everything in his report. This will give you stronger negotiating power with the seller.

During the inspection, be the inspector’s shadow. Follow him through the home and ask questions. He should educate you about the house throughout the inspection.

Buying a home for the first time is overwhelming, exciting, scary, and fulfilling all at the same time. But by being realistic and thoughtful every step of the way, Millennials and other first-time homebuyers will see more ups than downs in this milestone experience.

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