So You Think You’re Ready to Be a Young Homeowner
Millennials make up the second-largest generation in U.S. history, representing 20 million American households. While millennials have been dubbed the renting generation by some, they are starting to make strides in the housing market. In the summer of 2014, 30% of home buyers were millennials, according to an analysis from realtor.com.
Even though more millennials plan to buy a home in 2015, your first home purchase can still be a scary proposition. After all, how do you know if you’re too young for homeownership? Here’s how to tell if you’re ready.
Where will you be in the next 5 to 10 years?
Buying a home is a time commitment. If you sell too soon, you won’t build up any equity and you might take a loss on the deal.
With that as a guide, don’t consider buying a house unless you’re ready to live in an area for at least the next five years. If you think your job might relocate you sometime soon, or you’d like to try life in another city, buying may not be a smart idea right now.
Are you ready to live alone?
If you’re buying a home on your own, odds are you’ll end up living alone some of the time. Many young people buy a home expecting to have a roommate, but plans change and roommates move out.
While there’s nothing wrong with renting a spare bedroom, make sure you’re emotionally prepared to live alone at least some of the time.
Do you have time to DIY?
Owning a home means routine maintenance, repairs, and home improvement jobs over the weekend. You’ll have to mow the lawn, unclog drains, fix leaking pipes, and address other home repair jobs.
Before you commit to homeownership, make sure you have the time (and the desire) to spend some nights and weekends working on improving or maintaining your biggest investment.
Can you afford it?
Buying is often cheaper than renting in the long run, but the upfront costs are much higher. When you rent, you have to pay only the first month’s rent and the security deposit. When you buy, you’ll have to make a down payment and cover closing costs.
While you can find loan programs that will work with smaller down payments, you’ll still spend much more upfront to buy. You’ll need the down payment plus enough cash reserves to get approved for a loan. If you don’t have much saved in the bank, it may be better to wait.
Do you know why you want to buy?
Buying a home is one of the biggest financial decisions you’ll ever make, and it isn’t something you want to rush. Don’t listen to negative thoughts or give in to peer pressure about how you “should have a house by now.”
If you can think of several reasons why you personally want to be a homeowner, you’re likely emotionally ready to consider buying. Otherwise, it might be better to rent until you’re sure you want to make the transition.
By: Angela Colley