The road to becoming a homeowner for many Millennials can sometimes seem impossible. Juggling exorbitantly high rents with the burden of student loans makes saving up for a down payment much harder now than it was in the past. Yet, despite these challenges, many people are able to navigate the barriers and find their way into becoming homeowners. In fact, a Bloomberg report shows that people aged 18 to 34 have become the largest group of homebuyers in the U.S.
We found some Millennials who managed to become homeowners and asked them how they did it.
So…Why Buy A House?
We all know rent prices are constantly on the rise. Many young people are beginning to consider that it may be more financially sensible to be a homeowner than a tenant, despite the upfront expenses. This calculation is what was on the mind of Curtis, a resident of Urbandale, Iowa. “I considered the cost and value proposition,” he said. “[I] came to the conclusion that it would not be much more expensive than the rent I was paying at the time.”
Other Millennial homeowners agreed that in the end, it was buying was a better bargain. Chelsea, who lives with her husband in Buffalo, New York felt the same way. “We felt like we were just throwing money away by renting.”
Claire, a resident of Des Moines, Iowa had spent a good part of her early life traveling. Claire lived in India for a few years after college. When she came back, she realized that she didn’t really have anywhere to stay. Once she decided that she wanted to settle down and stay in one place, purchasing a home seemed like a good next step to put down some roots in her community.
Madi, who also recently purchased a home in downtown Des Moines, agreed with purchasing a home to avoid high rent costs. But she was also motivated by other reasons. “I like to not worry about the people around us—new neighbors upstairs, loud dogs, things like that.” Having more control over her living environment was worth the challenge of purchasing a home.
How Did You Do It?
According to a study by ApartmentList, 68% of Millennials have less than $1000 saved up for a down payment. So, with such dismal rates of savings, how do people manage to find the cash needed to purchase a home?
Claire managed to solve this problem through some forward planning, a bit of luck, and compromise. She found a friend who was looking to sell a house. “The house was actually in very bad shape,” Claire said. “The previous tenant was a hoarder. The house needed a lot of work.” Claire approached her friend and offered to take it off her hands for a lower price. “I had to make some compromises,” Claire said. “It wasn’t my ideal neighborhood. I had to put a lot of effort into it, and it was a long process… it didn’t even have running water when I got it.”
But now the Des Moines resident is thrilled with her purchase. “The house is now in my name, and it’s almost paid off!”
After renting for a number of years, Chelsea and her husband were ready to settle down and purchase a home in Buffalo, New York. “We were lucky because we didn’t really come out of school with a lot of student loans,” she said. “So when we were ready to buy, we didn’t have much to hold us back financially.”
However, being able to afford a home soon after graduation did not mean that the couple did not have some compromises to make. “The guy who owned the house before us was a bit shady. We had to do a bit of work on the property when we moved in,” she said. “But it was worth it.” Chelsea and her husband also decided to purchase a duplex instead of a single-family home. “We are first-time homeowners and also first-time landlords. But the extra income helps us put more towards our mortgage each month.”
What Compromises Did You Make?
Renting out a room or part of the house continues to be a common thing for many Millennials who buy homes. Curtis, who bought a home in Urbandale, Iowa a few years ago, also went that route. After making the choice to forego college and student loans, he decided to save that money instead and invest in a home. He set aside tax refunds.He sold old comics and added the proceeds to his savings account. “I bought the house alone. So I made sure it was something in my price range, something that I could comfortably pay on my own,” he said. “But I have had a roommate in the past, and I wouldn’t be against it again in the future. The extra income is always welcome.”
Staying within your price range is always a factor when purchasing a home, especially when student loans are involved.
When Madi and her husband decided to purchase a home in the downtown Des Moines area, she was concerned about what she actually qualified for. “I went to grad school and came out with about $200,000 of student loan debt,” she said. “So I was worried when we went through the bank that it would limit our ability to borrow.” Thankfully, the couple was able to qualify for VA loans through her husband’s military service. “I was lucky that my student loans were all under income-based repayment, which helps with my ability to help pay the mortgage.”
What Is The Biggest Fear?
Taking a leap into home ownership can be scary. And it’s no wonder that many people are terrified of what lies ahead. “Our biggest worry was that we were biting off more than we could chew,” Chelsea said about the process. “What if something major and expensive went wrong, and we were not able to fix it?”
These concerns are absolutely valid, especially for people who have been so used to renting. Landlords take care of leaky roofs, snow on the driveway, or a hot water heater that’s not working. The expenses that come with purchasing a home can sometimes take you back. Curtis agreed with the sentiment: “A major repair is absolutely my biggest concern with owning my own home.”
Claire, who purchased her house via contract with a friend, came across this issue while refurbishing the home that she would be living in. “The house was old. And the windows were terrible, which in Iowa is just not an option.” She took out a small loan to pay for new windows.
Although concerns can be financial, sometimes it’s the prospect of homeownership itself that can be the biggest barrier. “I hate long-term commitment, and worry that maybe I’d want to move in the future or change locations,” says Madi. “I’d like to be able to pick up and sell my house without worrying about losing too much money.”
Takeaway
Millennials are well aware that buying a home in itself is a huge commitment. So knowing what’s affordable is a great first step in the process. Regardless of their fears about buying homes, Millennials are pulling together creative resources to navigate the process in a way that makes sense with their ever-changing circumstances.
Wondering how to start? Or what you can afford? Create a financial profile with Morty today.
