Many of today’s new home buyers are Millennials – the generation born in the 80s and 90s – who are now getting married, starting families, and stepping into the real estate arena for the very first time. This is the same generation that grew up in a boom, followed by a bust and an insane decade of home-price escalation, wide scale under-financing, and subprime lending. Having witnessed the housing market’s wild ups and downs, Millennials may be wondering what new rules apply in this evolving real estate realm. Luckily, the ‘new rules’ can be discovered in the same tried and true traditional rules of home buying that were overlooked in years past.
Here are thirteen rules for Millennials looking to buy (while avoiding a housing bubble burst):
- If you can’t afford it, don’t buy it.
- Don’t jump into a home purchase blindly. Do your research, learn about the area, get advice from others, and study all the available data.
- No more creative financing: buy properties with traditional 30- or 15-year fixed loans – and know what your mortgage payment will be each month for the entire mortgage term.
- Always put 20% down.
- Whatever the bank says you can afford, subtract 20%, and you’ll never be house poor.
- You’re not just buying a house, you’re buying a neighborhood.
- It’s harder to get a mortgage because qualifications are more stringent these days. Keep great financial records, and be patient throughout the process.
- Don’t expect the market to bail you out. That means no overpaying for a house you can’t really afford in hopes of market appreciation making up the difference.
- Less is more. A smaller, practical, easy-to-maintain house is the new, big, rambling mansion.
- Stay on top of your credit, and shoot for an excellent score (above 750).
- Plan to stay in your home at least 5 years. Think you’ll need to sell before then? Keep renting until you know you can stay put for a while.
- Budget for all the ongoing costs of home ownership – not just the monthly mortgage payment. Be sure you have the funds for property taxes, insurance, maintenance, upkeep, and even an emergency repair fund.
- If you are questioning your job security and your ability to get a new job quickly in the event of a layoff – don’t buy yet.
To a generation who saw risking everything and buying homes with zero down as the norm, these rules may seem new. But, as they say, everything that’s old eventually becomes new again. In this new era, Millennials simply need to look back to get ahead and buy safely, sanely, and securely in the current housing market.
ALL: What’s the one home buying rule you’d never break?