Buying your first home is exciting and it should be. You are finally living the American dream but, if you’re young or a millennial you may be facing some challenges. I want everyone to have a wonderful experience when they buy a home but being prepared really can put you ahead of the game. Here are some issues that young people face when looking at homes in making their first purchase.
#1. Not saving enough before they buy.
Yes, you can buy a house with zero down or extremely low down payment, but the lower your earnest money or down payment, the higher your interest rate can be. Banks want to see that you have some reserves available and have some liquid funds if needed. If there’s an emergency with the house, it’s important to have at least a few thousand dollars set aside for repairs and replacements. Making a down payment of 3% to 20% is really ideal.
#2. Rushing into a purchase too fast.
One of the oldest marketing tricks is creating a sense of false urgency, and although in some markets you do have to pull the trigger fast, it’s important to think about the purchase before completing it. Remember, this is probably one of the largest purchases you’ll ever make so it’s important to think on it and make sure you’re ready.
#3. Not budgeting for closing costs.
A common mistake with any buyer is not focusing on closing costs. Sometimes, buyers completely ignore anything other than the earnest money deposit and down payment, but closing costs are required for things like appraisals, recording fees, transfer fees, title and escrow fees. This can run anywhere from an additional $2000-$10,000 depending on the fees incurred. Buyers will need to cover property taxes, homeowners insurance, and other fees at closing and while this can be built into the purchase price of the home, it’s important to understand all the costs involved that a buyer will need to bring to the table.
#4. Verifying you have the right home.
More than just the house itself, buyers need to verify they are in the right neighborhood, school district, and community for their needs and budget. If you’re moving to an area you’ve never been before, it’s important to drive around and find out of the neighborhood and community fit your lifestyle. Check the safety and crime rates for an area and double check on the school ratings even if you don’t have children. Resale value is important in finding a home in a good school district can be critical when it comes to selling the home later on.
Understanding the real estate process and all that it involves is a critical point to the home buying process. Again, it’s one of the largest and probably the most important purchase you’ll ever make so confirming you have the right home at the right price is essential to homebuying satisfaction.