For the last four years, millennials have been the largest share of home buyers at 34 percent according to the National Association of Realtors.
With the market on the rise, it’s crucial to be aware of traps millennials could potentially fall in to when purchasing a home. Chris Lim, San Francisco based entrepreneur and founder of California’s most innovative residential brokerage Climb Real Estate, has helped a number of millennials find their dream homes and can offer valuable advice when it comes to common home buying pitfalls:
Know Your Numbers!
Before you start visiting open houses on the weekends, make sure you are aware of all the costs that come with owning a home. Many homebuyers don’t realize property taxes, homeowner’s dues, and closing costs are not included in the listed price you see online but will inevitably be part of your monthly nut. On the flip side, remember to figure in tax savings and mortgage deductions that come with homeownership as that may improve your tax position. It is highly recommended you consult with a mortgage professional who can walk you through these numbers. An online mortgage calculator just won’t cut it.
Don’t Bite Off More Than You Can Chew:
Often you may find that you can afford more than you originally thought. Your mortgage professional may have given you a fat pre-approval making you feel rich… but don’t get too excited. We find many millennial homebuyers quickly start factoring in future raises and potential income to make that monthly payment more comfortable. It’s easy to stretch when that beautiful walk-in closet is staring at you, but you may regret it when you’re stressing every month to make that monthly mortgage payment.
Don’t Get Stuck in the Rent Trap:
In several cases we find that exorbitant rent rates are keeping renters captive by unexpectedly siphoning off cash that otherwise might have been saved for a down payment. On average, it takes many first-time homebuyers a few years to save up for rent. With historically low interest rates it a good time to jump off the fence now before they start to hike up. Once they do, a higher down payment may be required to qualify for a loan making it that much harder to purchase.
Buy a House Not a Home:
It’s important for millennial homebuyers to get in the game now but to also be smart about how they invest. In most cases real estate is a liability rather than an asset, so if you are going to invest your money, do it smartly. If you can’t afford the dream home, it might make sense to purchase property that generates income and cashflow such as a rental property. Remember that buying real estate doesn’t necessarily mean buying your dream home with the white picket fence.
Chris Lim is the founder and CEO of Climb Real Estate, a leading San Francisco-based real estate firm. Climb offers a comprehensive array of brokerage and marketing services for residential buyers, sellers and developers. Under Chris’s leadership, Climb has become the fastest growing boutique brokerage representing some of the finest properties in the city.