Millennial homeowners are feeling frustrated, and the lessons they’ve learned along the way offer an opportunity for the rest of us, regardless of age or station, to enter homeownership better prepared.
Nearly two-thirds, or 63 percent, of millennial homeowners surveyed by Bankrate.com said they had regrets about buying. That is more than any other age group, defined in the survey as people aged 23 to 38, and nearly double the regret rate of baby boomers.
Also according to Bankrate.com, a full 79 percent of Americans still consider homeownership part of the “American Dream.” The key, then, is to keep reality in mind and be prepared for all of the potential costs of homeownership — not just your monthly mortgage payment.
Current mortgage rates are favorable, but in many areas home prices remain strong. This is awesome for Sellers, but for Buyers it may mean settling for a smaller home, or a home outside their ideal neighborhood, in order to secure a home they can afford. The size of mortgage payment you can afford depends on a variety of factors, including your income, your monthly debt payments, the interest rate you qualify for, and the amount of down payment you are able to contribute.
Use a free online mortgage calculator as a starting point, and speak to more than one qualified lending professional to talk about not just what you qualify for, but what you can really afford. Consider your current debts, as well as future debts — such as auto loans for vehicle upgrades within the next few years, or increasing student loan payments. Real Estate is a savvy investment, but if you are in the market for a starter home, don’t make the mistake of purchasing a home beyond your means; go for a home you can really afford, and work your way up to your dream home one step at a time.
One factor Buyers of all ages neglect to take seriously is home maintenance. As a renter, if something breaks you don’t sweat it — you call the landlord. Once your name is on the mortgage, if something breaks or stops working as well as it should, you’ll have to call a repairman or replace what’s broken — and the check will come out of your pocket.
Annual home maintenance costs should be a part of every homeowners budget, and these costs range from 1-3%, depending on the age and condition of your home, as well as your location. For a $300,000 home, you should be prepared for an annual maintenance cost of $3,000, or more. This expense is more palatable if you plan and prepare for it, rather than waiting for the rain…without an umbrella in hand (or enough money to fix your leaky roof.)
Ideally, home maintenance costs are set aside as part of your regular budget, and not pulled from emergency savings. As a potential homeowner, you should think through questions like, “What will we I do if the furnace needs to be replaced?” Or, “Do I have the cashflow to replace a window if necessary, or have the HVAC serviced?” Furnace installation runs around $4,000 on average, nationally. This isn’t a repair you can expect on a regular basis, thank goodness, but furnaces do wear out, and in many parts of the country, this is not a system you’d want to live without for long. Homeowner’s insurance can assist with items like a broken window, depending on the circumstances, but you should be prepared for unexpected breakdowns as well as ongoing maintenance like furnace filters, carpet cleaning, lawn maintenance, and other routine tasks.
So, what lessons can we learn from frustrated young homeowners?
- Buy a home you can actually afford, and consider both current and future debt when making decisions about how much house you can afford.
- Factor in the cost of home maintenance when planning your home purchase. Set aside funds for home repairs and maintenance as part of your regular budget, rather than relying on emergency funds to cover these costs.
Whatever your age, I’d like to hear your story, and to know more about how I can help you sell your current home, find your next home, or invest in the lucrative Denver Real Estate Market. Let me know how I can help,