When it comes to real estate, millennials find themselves in a unique position to make mistakes.
While some older millennials were lucky enough to find themselves in the sweet spot of affordable prices and disposable income, many younger ones make up ‘generation rent’, struggling to pull together deposits without the help of family members in a world of constantly inflating asking prices.
This lack of accessibility to the housing market has developed a generation that not only can’t afford to get on the property ladder but aren’t getting their house-purchasing mistakes out of the way before it harms them financially.
To help this generation avoid big errors that will sour their first buying experience, we’ve put together this list of common mistakes to avoid.
Not shopping around for a mortgage
Mortgages aren’t necessarily the easiest concept to get your head around, and many millennials will gladly admit to not knowing the first thing about them.
While it might be tempting to jump at the first somewhat affordable offer you get, a key part of buying your first home is making sure you’ve got a mortgage as perfect for you as the property is.
In this case, that means getting something both affordable and suitable for a young, first-time buyer.
Buying a home should never start with browsing listings. Instead, you should look to get pre-approved for a mortgage ASAP. Meet with a lender who can provide a professional opinion on your finances and, perhaps most importantly, understands both your situation and the local area.
One of the biggest mistakes millennials make when looking for a mortgage outside of over-estimating their financial strength is choosing the first available option. You’re better off going with a local mortgage broker or one with an understanding of key areas (even if they’re online such as Breezeful), as they won’t lead you down the wrong path.
Realtors will want to see proof of a pre-approved mortgage as a sign you’ve got your finances together and have a plan. Do not think this is a step you can sort out later.
Not thinking about the location
It’s been said that location is everything when it comes to real estate. While that might not have the same resonance in a work from home world, location should still play a significant role in deciding your first home.
First and foremost, you’re going to be living there, so it’s important to choose a location you enjoy. Do your research into the accessibility of local amenities, such as:
- > Schools
- > Public transport links
- > Nightlife
- > Culture
- > Shopping and groceries
These are simple, everyday essentials you’re going to need to live and grow in your new home. The last thing you want is to wake up on your first morning there and realize it’s a 40-minute walk to the bus.
Likewise, when it comes time to sell a property, a flagging location can significantly depreciate the value of your home. Don’t just research what your town or city has now, but how the picture of it and real estate prices have changed in the last decade.
In the case you’re a first-time buyer looking to rent out your property, location becomes important for an entirely different reason. The reputation of an area will hamper your ability to attract certain renting demographics, such as families, limiting you to groups you may not be thrilled about renting out to, such as students. Rebate 4 U’s solid guide for first-time landlords is a good place to start for avoiding such common mistakes.
Not demanding (and attending) an inspection
We get it: you’re eager to get the deal done, conscious of the other buyers lurking just over your shoulder waiting to snipe you with a better offer at the last minute.
The pressures of the housing market force a lot of millennials to make bad decisions, but perhaps none as detrimental to their financial futures as not demanding an inspection of the property.
Independent inspections are a key part of the buying process, giving you a chance to root out potentially significant issues with the property that could impact your ability to live there or give you an opportunity to argue down the price.
Not all structural and cosmetic issues will leave the house uninhabitable. Hiring a professional surveyor for both the property and surrounding land (ideally regulated by the AOLS) will give you a clearer picture of what you’re buying into.
Forgetting about home warranty
Inspection or not, very few buyers find their new home in perfect condition.
Wear and tear is a natural part of buying pre-owned property, and you’ll likely have your own ideas for decorating you’re eager to get started on. However, to ensure these scrapes and tears don’t develop into more significant issues, it’s important to ask about home warranty during the closing process.
Warranty won’t cover everything, but will provide you with major savings when something fails for regular use, such as a water heater or outside corrosion.
With a warranty, you won’t be shelling out the thousands of dollars you likely don’t have to cover for the previous owner’s mistake — a fail-safe worth having.
Think: is now the right time to buy?
Now that you know the mistake your peers have made it’s time to think: is now really the right time to buy?
Real estate is undoubtedly one of the best investments a young person can make if they can afford it. The question is just that though, can you afford it?
Below is a checklist of some of the key questions you should be asking yourself and researching before you seriously start to consider buying a home (for yourself, or as a rental investment opportunity):
- > Do I have a healthy credit score?
- > Do I have the 10-15% saved to cover a down payment?
- > Am I secure career-wise?
- > How long do I plan to live in this property?
- > Am I mentally ready for the responsibility of being a homeowner?
It might get you out of your parents’ place or cut down those rental costs every month, but buying a house is a huge commitment that shouldn’t be taken lightly. You’re not just handing a huge amount of cash but signing yourself up to deal with broken boilers and broken timber. It’s harder than it sounds.
These are mistakes most millennials make, whether they have previous buyers and experts guiding them or not. Be aware of the signs of them and go into the process confident you’ll make a smart decision.
For more blogs on homeownership, check these out:
15 Mortgage Terms First Time Buyers Should Know
