Thanks to less-than-ideal market factors like the mortgage crash of 2008, the ongoing student debt crisis, and record-setting unemployment rates, many Millennials have had to delay major life events including home ownership. But over the past few years as the U.S. climbed out from the Great Recession, opportunities for millennial home ownership has improved.
The data shows it. According to the Wall Street Journal, the largest increase in homeownership among age groups in 2017 was observed in the under-35 sector. The most populous generation in American history – the Millennials – are now buying houses, and consequently, the residential real estate market is pretty intense right now.
That said, certain obstacles may stand in the way and need to be kept in mind to get over the hurdle and close on a new home. One thing new homebuyers often forget is while the process of buying a home is expensive, owning a home has its costs, too. It becomes a different financial strategy, and it’s hard to prepare for because it’s new and different, so you will want to anticipate costs before and after buying your first home.
Start with a Down Payment
You will most likely start with your down payment. Finding your first home in our competitive market place can be challenging. You’ll want to get prequalified with your community bank for your new home so you know how much you can borrow and how much you will need for your down payment.
Earnest Money Shows Your Serious
You will also want to consider earnest money. When you find a home you’d like to make an offer on, you will most likely have to put down earnest money to show you are a serious buyer. It can be your first cost in the home buying process. Earnest money is a deposit made to a seller that represents a buyer’s good faith to buy a home, generally one to two percent of the purchase price. The money gives the buyer extra time to get financing and conduct the title search, property appraisal and inspections before closing.
Necessary Home Inspections
Your next cost to consider is the need to have a home inspection. Your home is probably going to be the largest purchase you will ever make, so it is important to understand the condition of your investment. A home inspection is an examination of the home’s accessible structure, systems and components. While a home inspection is not a prediction of future conditions and cannot reveal every concern that exists, or could exist, it will significantly reduce your anxiety by arming you with the knowledge you need to make an informed home-buying decision. You are probably looking at a cost of $300 to $500 for the home inspection.
Radon inspection is also important prior to closing on a new home and according to HomeAdvisor.com radon inspection costs range between $148 and $748, averaging out at $447. Home test kits range between $10 and $30. However, hiring a pro is the most accurate method of testing. Costs to mitigate radon average $1,000 and are separate from testing. Radon is a radioactive, odorless, colorless gas formed by the decay of radium in soil, water and natural gas. It is the number two cause of lung cancer.
Final Step: Closing Costs
Closing costs are your final buying costs. Once you navigate through all of the inspection costs, you reach the closing date when home purchase becomes home ownership. Closing comes with more costs. Typically, home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees. So, if your home cost $150,000, you might pay between $3,000 and $7,500 in closing costs. On average, buyers pay roughly $3,700 in closing fees, according to a recent survey from Zillow.
The joys of owning a home come with homeownership costs, too. The process of buying a house is expensive, but actually owning a home has its costs, too. Aside from mortgage payments, you will get bills for everything you can think of and for many things unplanned. Now is the time to tighten your budgeting as you will have to consider all of the little things that come up constantly, like an appliance breaking down or a roof leaking.
Buying a home is a serious decision that can be overwhelming, stressful, but ultimately, very rewarding. When you think of buying a house, you must think about money over and above the purchase price. It really is as expensive as you think it is, but it is also very rewarding to come home to your home.