(Photo by Matthew Henry from Burst)

An entire generation is coming of age and starting to think about purchasing their first homes. The oldest Gen Zers are reaching their mid-20s and potentially ready to make what would undoubtedly be one of the biggest purchases of their lives so far. These generations will make up the young homebuyers entering the market.

But even if they feel ready to make the leap, for many first-time or young homebuyers, purchasing a home can feel intimidating. The process can be complicated and requires some specific knowledge and expertise about the market. But it also requires some serious personal reflection.

The first thing a young homebuyer — roughly aged 25 to 40 — should think about when entering the home buying process is how to determine what they can afford. Young and potential new homeowners often underestimate their buying potential by $150k or more! And almost half of younger buyers aren’t really sure how to determine what might be a good interest rate. 

When they feel uncertain or don’t have strong knowledge, a lot of potential young homeowners think they should wait and decide to look to buy a home later in life. Or they possibly even give up the search and decide to continue renting. 

If you’re one of these younger and potential new homeowners and interested in considering your first purchase but aren’t sure where to begin, here are some things about homeownership you should understand as you start the process:

Young Homebuyers Can Probably Afford More Than You Think

It can be hard to understand exactly how much is needed for homeownership, especially as you look at numbers — potentially in the hundreds of thousands — that you may have never considered before. But with the proper knowledge of pricing, mortgage interest rates, and value appreciation, Millennials and Gen Z can get a better idea not only of how much home they can afford, but also what home can suit their needs going into the future… and with good resale value. 

Perhaps no generation understands better how recent events have caused our lives to change, including what homeowners are looking for out of their living spaces. So knowing how much home you can afford allows you to be ready to look at properties that suit your specific needs — and those of the future as well. 

Working with a great mortgage professional is a great step to get you pre-approved as you consider your finances and land on a smart range with which to begin your home search. 

Down Payments Aren’t Set in Stone for Young Homebuyers

Down payments can be daunting. That’s a huge chunk of money to put down all at once! And if you’re doing it for the first time, it can be seen as a major obstacle for a homebuyer. But it really shouldn’t be.

One of the things that young homebuyers hear and worry about may be the myth of having to put down 20%. Conventional wisdom does say to plan on a down payment of about 20%, but this is only a guide. Some mortgage professionals can work with you to consider your specific circumstances and find a down payment amount that is appropriate for your situation. 

It’s true! According to a recent Home Buyers and Sellers Generational Trends Report from the National Association of Realtors, the median down payment for homes purchased between July 2019 and June 2020 was only 12%. And for young and new homeowners in the 22 to 30 age range, that number was even lower — just 6%.

Waiting Isn’t Going to Make Homebuying More Affordable 

Thinking back to that proper knowledge of pricing, mortgage interest rates, and value appreciation, it may be easier now to see why putting off buying a home will probably be more costly for young homebuyers. 

As the economy gets better and inflation rises, mortgage rates are also anticipated to rise. Even a small increase in the mortgage interest rate can affect your buying power, so it’s best to take advantage of historic low rates while they are available. 

Mortgage rates rising along with home price appreciation means that waiting to buy a home later could cost young homebuyers much more in the future.

Buying a home is a big deal, and it can be overwhelming at the start, but with the right agent, the right mortgage professional, and a solid knowledge of your financial situation, new and young homebuyers can be ready to take advantage of great offerings. 

Check out our current listings for some of the best homes in the Springfield and Burke area that may suit you and your family’s needs well into the future.