Many millennial homeowners in the U.S. are feeling “house rich, cash poor” according to a recent study. After fulfilling their homeownership dreams, some millennials have become uncomfortable with their finances. In this situation that even wealthy millennials are affected by the continuous skyrocketing home prices, it’s important that you figure out if you’re ready to enter the housing market ahead of time so you can enjoy your investment.
In its first annual Hometap Homeownership Study where 675 homeowners were surveyed in June 2019, 73 percent of the respondents, at least some of the time, believed that a big chunk of their finances go to housing, to the point that they worry of having not enough funds to cover future and unexpected expenses. As someone looking to own a piece of the American dream, there are ways you can reduce the stress associated with homeownership, especially if you think that your current income hasn’t adjusted enough for inflation. While closely monitoring the housing market here are some of the things you can do:
Save for a down payment and wait
Saving for a down payment is a good start for someone planning to buy a home. The average national home value is now pegged at $244,054, and although there are mortgage options where you can put an upfront down for as low as 3 percent, you may find it ideal to increase your down payment to lower monthly costs. For example, if you were able to save 20 percent down, conventional lenders will not require you to purchase a Private Mortgage Insurance or PMI. Aside from the down payment, another upfront payment you need to settle is the closing cost. You may want to delay buying a home until you have saved enough funds for your dream home. This could be also an ideal time to improve your credit score so lenders can offer you much favorable mortgage rates.
Choose a place where you can find affordable housing
If you’re working in California, Florida, or in New York, you may want to think twice of buying a home in such places as home values have increased in those states by about 40 percent since 2000. Affluent millennials living in pricey metros are reportedly looking to buy homes in more affordable areas. Major city outskirts and suburbs could be your best options when choosing a place on a budget. When looking for a place, you may initially need to make some reasonable compromises until you become comfortable with your finances. Find a place where you can find better employment opportunities, or if you’re happy with your job, you may want to ask your employer to have a telecommuting arrangement.
Consider a starter home
A starter home may not tick many of your boxes when looking for your “forever home” but there are a few notable advantages if you consider it as a first-time homebuyer. Affordability is one of the main reasons why you should consider a starter home. Depending on the state, the most affordable starter home has an average price of $42,300. Because a starter home is affordable, you don’t have to take out a large mortgage. A starter home may increase its value if you make some improvements like installing energy-saving equipment. Many first-time homebuyers consider a starter home just to escape costly home rentals and penetrate the housing market. Once you understand the market, you may want to plan on how you can buy your “forever home”.
Homeownership should be enjoyable
Fulfilling your homeownership dreams should not be a burden on your finances to the point that you feel “house rich, cash poor”. As someone planning to take out a mortgage, the tips mentioned here can help you reduce the stress of homeownership. If you want to know more tips or if you have mortgage-related questions, simply get in touch with one of our professional loan advisors.