I’m a Real Estate Agent: 4 First-Time Homebuyer Tips for Millennials

The first generation to grow up with the internet, millennials are well known for progressive values, purpose-driven aspirations and AIM nostalgia. But that doesn’t mean they’ve had it easy . Between recessions, pandemics and natural disasters, some have deemed millennials as the “unluckiest generation,” with many becoming first-time homebuyers much later than their predecessors.

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If you are a millennial ready to purchase your first home but are feeling behind on where to begin, fear not. GOBankingRates spoke with esteemed real estate agents who offered up first-time homebuyer tips to help millennials find the best deals and avoid common pitfalls along the way.

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Get Clear on Your ‘Buy Box’

The first steps can feel overwhelming, which is why realtor and co-founder at SoldFast , Ryan Dossey, recommended becoming very clear on what specifically one needs in a home, and then not straying from that criterion. For instance, he asks his clients to figure out how many beds and/or baths they require, what square footage they are looking for, whether or not they want a yard and/or a garage (and, if so, how large), what their maximum budget looks like, and what zip codes they prefer.

“By simply restricting their options to what they truly want, [millennials] can reduce the chance of Zillow overwhelming them or making themselves house poor,” stated Dossey.

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Decide How You Plan To Use Real Estate as Part of Your Wealth Plan

Getting clear on how a potential acquisition fits into one’s financial goals can help new homebuyers decide if their purchase will serve as more than simply a place of residence. “Do you plan to sell this home when you move out or rent it out as passive income?” Baird & Warner realtor, Brad Byrne, advised asking.

Since some communities restrict rentals, this may influence search criteria. Dossey added that, given today’s cost of living, it’s even become common to “house hack” a first home in order to reduce overhead. “Buy a duplex, triplex or quad, and lease the other units A more luxury version would be to buy a house with an ADU and do the same,” advised Dossey.

Levi Rodgers, realtor and co-founder at VA Loan Network , advised always thinking long term — even for a starter home. “Consider the resale value and potential growth of the neighborhood […] and consider the future development of the area,” he advised.

Budget for Unexpected Costs

When it comes to budgeting, it’s important to delay the instant gratification of an Instagram-worthy home and, instead, save for a rainy day. Dossey recommended not maxing out one’s pre-approval so there can still be plenty of room for unanticipated costs. These can include everything from repairs and upgrades to increases in taxes and insurance rates.

Omer Reiner, realtor and president of FL Cash Home Buyers LLC , proposed a strategy of figuring out what 28% of your income is, and then basing your home search on properties priced in that range. Looking around based primarily on what a lender will give you could just be setting yourself up for disaster.

“I tell all of my clients that their first home should not be a flex, and is likely not going to be as nice as the home they grew up in,” stated Dossey. “It took our parents decades to get to where most of us think we should start out.” Researching areas where quality living comes at a lower price tag can also be wise.

Thoroughly Research Financing Options

“Most millennials are likely going to be looking at FHA (Federal Housing Administration) financing, which allows you to get into a home for as little as 3.5% down,” stated Dossey. Unfortunately, FHA loans will lock one into PMI (Private Mortgage Insurance) for the life of the loan. This serves to protect the lender if the buyer stops making payments, but it means the buyer could be paying more money over the life of the loan when compared to other, more conventional loans. This is why Rodgers encouraged exploring all options, stating, “I’ve seen buyers save thousands by shopping around for the right lender.” As an example, it’s possible for veterans to qualify for VA home loans.

Finally, Reiner recommended always doing due diligence when searching for the best interest rate balanced against the loan’s terms . Because, once again, “the longer you pay on a mortgage, the more you are likely to pay over the loan’s life.”

This article originally appeared on GOBankingRates.com : I’m a Real Estate Agent: 4 First-Time Homebuyer Tips for Millennials