Remember when people used to think Millennials would never buy homes enough to impact the residential real estate market? Well, surprise! Millennial home buyers have passed Baby Boomers for a seventh year in a row! According to the National Association of REALTORS®, Millennial buyers (ages 22 to 40) continue to make up the largest share of home buyers at 37%. This year, 81% of homes purchased by millennials were single-family homes between $150,000 and $350,000.
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While a fast-paced real estate market with high demand and low inventory creates challenges, it’s not impossible for younger generations and first-time homebuyers to get in the game. However, it’s important to be strategic if you want to be taken seriously. Many first-time homebuyers find their house before they find representation which can pose risks for several reasons including not understanding what buying a home entails and not having everything in order for an offer to be considered. If you’re looking to buy your first home, here are some important tips to ensure it happens:
1. Pay off student loans and other debt: Being a millennial may have some disadvantages, such as being recently out of college and having student loans and other debt. The National Association of REALTORS® found that, after student loans, two other expenses delayed saving for a down payment including car loans and credit card debt. Make sure you speak with a trusted mortgage banker to figure out how much to pay down and what to pay down that will have the most positive impact on your ability to qualify.
2. Check and improve your credit: Because money is a major component when buying a home, you should continuously check and try to improve your credit score, as well as save more money than first expected. Lean on the mortgage banker your agent introduces you to in order to make sure you are approaching credit repair in a manner that is most consistent with getting you qualified for the most appropriate loan.
3. Save more than you expect: Cash is king. Go into scarcity mode, BIG TIME. The more you have to put down on a home will have the most positive impact on your ability to qualify.
4. Get pre-approved for a loan: Most professional agents will not work with you in earnest unless and until you have been pre-qualified with a lender. Most agents prefer you work with lenders they work with often as they know these lenders are capable of performing. Loan officers with good track records and reputations help buyers to win in competitive situations.
5. Work with a mortgage banker, not broker: Mortgage bankers have more control over the loan process than brokers. Most brokers act as middle-men with big banks and investors and simply pass your information to the investors. Investors act slowly sometimes and can put last minute questions back on brokers. This can jeopardize deals. Bankers underwrite loans in-house and sell the loans directly to investors. They can walk down the hall to their underwriters and clarify questions on the spot. Working with mortgage bankers versus brokers typically makes deals go much more smoothly.
6. Work with a trusted real estate agent: Professional agents are experts and act as conduits of information and introductions, especially to trusted and respected lenders. An agent will guide you through the homebuying process by bringing to bear their experience, expertise, contacts (lender, title/escrow, inspectors, appraisers, attorney, etc.) and up-to-the-minute hacks, strategies and tactics that are working for their clients in this market.
7. Find an affordable house in a seller’s market: The rising value of homes is a challenge for younger buyers, but on the plus side, mortgage interest rates are super low. Once you start shopping, don’t give in to the temptation to buy a home that’s out of your price range.
The final piece of advice potential first-time home buyers should consider is to be educated on what is best to do to prepare for buying a home and avoid going down the rabbit hole on the internet. Although great for gathering advice, the internet is fraught with clickbait and conflicting information that often is not applicable to your particular micro-market. The best way to get educated is to find trusted professionals (realtor and lender) who do this all day every day. Use your research time to ask friends and family for recommendations and then research those recommended on the internet. Don’t be afraid to speak with several agents before you decide which one to rely on. Once you find the right one, lean on them and ask for direction to their trusted resources for research and information. After all, buying a home is likely going to be the single largest purchase in your life, so don’t leave your decisions to just anything you read on the internet.
Trevor H. Halpern, J.D. is the No. 1 independent agent at Phoenix-based North&Co. and the founder of the Halpern Residential real estate group.
