Millennial home buying trends are a hot topic in the real estate world. Millennials, also known as Generation Y, make up about 40% of all homebuyers in the nation. Born between 1981 and 1996, they’re settling into careers and buying homes for the first time. These roughly 80 million adults are quickly becoming the largest segment of homebuyers today. Millennials are reinventing the real estate agent-client relationship, where to get mortgages, and what the ideal home looks like. Read on to learn how Generation Y is reshaping the homebuying process.
Millennials’ relationships with realtors are different from older generations. Now that most information is available online, they don’t need to rely on real estate agents to find homes. Instead, Millennials rely on real estate agents to guide them through the paperwork process and represent them during negotiations. They are also pickier about who to trust and usually choose their realtor based on recommendations from friends and family. Millennials prefer communicating via texting and email and seek to develop a friendly relationship with their realtor.
Pew Research found that Millennials’ household income rates were two to three times higher than other age groups. However, many are still saddled with student loans and choose to live with their parents while they pay them off. This also means that Generation Y is starting families later than ever.
Millennial Home Buying Trends
Comprising nearly a quarter of the population, Millennials are more influential than ever. Here are interesting insights into how they’re changing the homebuying process:
Millennials are more sustainability-conscious and interested in minimalism than older generations. A study by Clever Real Estate found that Millennials considered 1,700 square feet acceptable, while Baby Boomers said they wanted a home closer to 1,900 square feet. And most Boomers surveyed had sold larger homes and were downsizing. There’s also an economic factor, as Millennials are cost-conscious, and smaller houses are cheaper to maintain.
Rather than going to the bank, Millennials feel comfortable finding mortgage lenders online. They also like exploring many options. The average Generation Y obtained six mortgage quotes, compared to three quotes for Baby Boomers.
The same Real Estate Witch study found that 90% of Millennials are willing to purchase a home without ever stepping foot in it. However, they rely heavily on other methods, such as live streams, virtual tours, and photos, to assess the home.
Weary Millennials have been through the wringer. Most entered the workforce during the Great Recession, and many still pay down student loan debt. Because a home loan is a huge financial decision, Millennials should explore all options to find the best lender and mortgage rates for themselves. The following are the best mortgage options for Generation Y:
Conventional 97 Loan Program
For those with good credit, a Conventional 97 Loan is an excellent option because it only requires a 3 percent down payment. This loan is reserved for first-time home buyers or those who have not owned a home in the past three years. A better alternative to an FHA loan, the Conventional 97 comes with lower mortgage insurance fees and higher loan limits.
First-time Homebuyer Program
Check out your state’s first-time homebuyer programs. These programs provide benefits like grants for down payments, assistance with closing costs, forgivable loans, and access to loans with below-market rates. These programs are perfect for Millennials who may need a little help fulfilling their dream of owning a home.
Millennials with less-than-stellar credit scores can still qualify for a mortgage via an FHA loan. These government-backed loans are issued through approved banks and lenders, allowing lower down payments. They also offer lower credit score requirements than conventional loans. The downside is that homebuyers usually pay higher interest rates and PMI since they are considered riskier than a conventional loan.
Lender-branded Specialty Loan
Many lenders offer specialty loans with a 3 percent down payment. Some, like Chase’s Dream Maker Mortgage, even offer down payment grants and money for completing financial education courses. Although these programs offer flexible credit guidelines, they still may be harder to qualify for than an FHA loan
When millennials are seeking to purchase a home their debt-to-income ratio should not exceed 28%. We want to ensure our clients can afford their homes comfortably to maintain their quality of life without putting too much pressure on their finances.
Yes! 85% of all millennial buyers are using real estate agents to purchase their homes. They are extremely vital in matching your checklists with a home you desire, negotiating on your behalf, and organizing contractual paperwork along with your attorney.
Millennial or Not, Casa Real Properties Can Help you Find your Dream Home
Whether you’re a Millennial, a Baby Boomer, or anything in between, Casa Real Properties can help you find the perfect home. We take pride in helping individuals from all walks of life fulfill their dream of owning a home in New Jersey. From obtaining a home loan to getting your keys on closing day, our experienced agents are with you every step of the way. Contact us today to get started.
Nancy Pavic is an expert in the New Jersey real estate market. For the past 25+ years, she has brokered Casa Real Properties, a well-distinguished real estate office in the Northern New Jersey area. Her prestigious awards include membership into the Top 1% of Realtors, the “Circle of Excellence” award by the New Jersey Association of Realtors, a front page cover spread of Top Agent Magazine, and a recipient of the Mayoral Award for Financial/Real Estate at the 2009 Paterson Women’s History Awards Ceremony.