Anyone who has spent time shopping for a home can attest to the frustration posed by the current real estate marketplace. Tight inventory easily is the biggest headache for both prospective homebuyers and the real estate professionals helping them.
Millennials entering the homebuying fray for the first time have found that many challenges await. From down payment confusion to credit history drama, working with a knowledgeable real estate agent can help them navigate the system more smoothly.
Millennials approach homebuying differently than older generations. Their preferences include relying more heavily on digital interactions and must-have amenities. With this age group representing 37 percent of the overall U.S. housing market, real estate agents and agencies have adapted to their penchants.
Danielle Graham Robinson, an agent with eXp Realty in Wexford, is affectionately known as the “millennial whisperer” for her ability to help this generation of homebuyers. She has sound advice for millennials hoping to beat the odds and find their dream homes in an otherwise crowded marketplace. “The biggest thing they must keep in mind is that home prices are going up, so their budgets aren’t going as far as they used to,” she said.
Julie Snider, a real estate agent with Achieve Realty, Inc. in Wexford, said the desired price range for most millennial buyers she has assisted has been in the $200,000 to $300,000 price range.
“They need to take time to understand the process really well; since real estate market conditions are not expected to change much this year, they will need to have patience,” she said. “They are probably not going to buy the first house they put an offer on.”
Myths and misconceptions about the homebuying process scare many millennials. Robinson makes it her mission to set the record straight and ensure that they have the facts they need to jump into the homebuying foray.
“One of the biggest misconceptions that millennials have about buying a home is needing to put down 20 percent to qualify for financing; this is the biggest barrier I see to homebuying for this generation,” she said.
Both Robinson and Snider said millennials should explore their financing options. There are many programs out there for first-time and low-income buyers lacking the traditional 20 percent down payment for the mortgage process. For example, Pennsylvania Housing and Urban Development (HUD) offers a first-time homebuyer course and completing the course qualifies homebuyers for down payment and closing cost assistance.
Other similar programs are available in the North Hills, Robinson said. “What they really need is to find a realtor who understands what those programs are and how to get them past these financial barriers.”
Snider recommends seeking preapproval from reputable lenders. “Choosing a local lender makes a difference to sellers when they have multiple offers. Local banks do better than online lenders because they have higher closing rates,” she added.
Another misconception that goes hand-in-hand with the down payment confusion is the effect that student loan debt has on the process. According to the Educational Data Initiative, 14.8 million millennials have student loan debt—more than any other generation. Millennials carry a $38,877 average balance per borrower in student loans.
Both Robinson and Snider said that their clients have expressed concern about whether outstanding student loans would prevent them from obtaining financing. “The debt-to-income ratio is a real contributing factor when starting the loan process,” said Robinson. “But if your loan payments are up to date and your credit is good, student loan debt shouldn’t be an obstacle.” A consistent employment history also helps boost financing success.
Hidden costs and confusing lingo also can impede the homebuying process for the millennial generation. Origination fees, cash at closing, down payments, homeowner’s association fees, and third-party fees from lenders (appraisal fees, title insurance, real estate transfer taxes among them) can surprise buyers at closing. The list of hidden costs most homebuyers do not expect goes on and on.
Finding an agent who can explain what to expect is important for avoiding sticker shock once sellers accept an offer. Snider said that she spends time educating her clients in these areas to ensure they feel empowered during their searches.
The secret to homebuying success for the millennial generation lies in choosing a realtor who understands their needs and the marketplace. Before committing to an agent, Robinson suggested asking the following questions:
• What is your experience with first-time homebuyers?
• What is your experience with millennial homebuyers and the challenges they face?
• What financial resources are available to us during the lending process?
• Which financial lenders do you work with and how many of them are committed to the Community Reinvestment Act for low- and moderate-income neighborhoods?
Snider recommended choosing an agent who is a good communicator capable of guiding millennials through the entire process. “Make sure they understand the millennial generation,” she said. “There are a lot of misconceptions out there about millennials, so choose someone who truly understands the millennial perspective.”