It’s projected this year that millennials will make up over 51% of national home buyers, which outnumbers the total share of homes purchased by Gen X (32%) and Baby Boomers (17%). What’s more, Realtor.com also reports that 45 million of those people will be first-time home buyers.
There’s plenty to learn about real estate. Buying or selling a home can be a daunting ordeal if buyers don’t feel knowledgeable about the industry, and according to a recent survey polled by Homie, we found that many people aren’t confident they have the tools.
We’ve put together five important things for buyers to consider when finding their first home, based on data from our recent home buyer survey. With the right knowledge and tools, the search for the right home can change from a stressful challenge to an exciting journey.
Check Your Credit
The first thing a prospective homeowner should do is check their credit score. In fact, they might want to be sure they’re at a number they’re comfortable with before even thinking about purchasing a home. Conventional home loans typically require a credit score to be at least 620 and if it’s below that, buyers will want to look into a Federal Housing Administration loan. For example, a score of 500 to 579 will need to put down at least a 10% down payment for a loan. Put simply, the higher the score, the lower the down payment.
Home Buyer’s Confidence
About 87% of millennial consumers don’t feel confident about buying a home, which is understandable considering the enormity of the decision. What this translates to is that consumers don’t feel knowledgeable enough in the topic of real estate. It’s important before buying a home to know significant key terms and what they mean. Buyers must also research the real estate in their area, and in the zip code they’re interested in before hiring a real estate agent.
Commission, What Is It?
After conducting our survey, we found that many millennials weren’t sure if they paid commission when buying a home. The answer is, usually not but closing costs are typically required. Almost 42% of our respondents believe it’s free to use a buyer’s agent to purchase a home, a common myth that has helped keep real estate commissions artificially high. Buyers should ask agents up front what they should expect to pay in agent commissions, fees and closing costs.
Work With An Experienced Real Estate Agent
We also discovered through our survey that a whopping 85% of buyers are unaware that in most states a real estate agent can become licensed with only 1.5-3 weeks of training. That’s very little training for a large commission with most properties being sold, or bought, in an average of 16 hours. However, working with a knowledgeable and experienced agent who understands your market and its current conditions can make all the difference in your home buying journey.
Of those surveyed, 50% of the respondents didn’t know about Private Mortgage Insurance (PMI) or how much money needs to be put down to avoid it. PMI is usually required when a homebuyer can’t afford a 20% down payment. New homeowners should strive to avoid PMI. It ultimately raises home payments and can make homes unaffordable.
With a little bit of research, first time home buyers can find confidence when picking their real estate agent and ultimately, finding the right home. Buying a home is a huge step but with knowledge and a great agent, consumers will be headed in the right direction and not toward financial disaster.
Wayne Graham is the Head of Real Estate for Homie Arizona. Homie is a real estate technology company changing the way real estate is bought and sold by eliminating high fees and commissions. The company simplified an outdated and overcomplicated process through a combination of technology and expert, full-service agent support. Homie is the #1 listing brokerage office in the state of Utah and growing quickly in the states Arizona, Nevada, Colorado, and Idaho. With real estate, home loans, closing services, and insurance, the Homie Tech family is making every aspect of buying and selling a home simple, affordable, and enjoyable. Finally, the way real estate should be. To learn more, visit: www.homie.com.