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The Late-Bloomer's Guide to Buying Your First Home

Meghann Foye

Buying your first home used to be a symbol of adulthood. But for many millennials and members of Generation X, we’ve put it off into our late 30s, 40s and 50s, toasting our last student loan payment instead.

In fact, thanks in part to our average 37K in student loan debt, the average age of first-time home ownership has risen to 33, up from 29 and 30 in the 70s and 80s.

If that’s you, there’s no need to play the comparison game or guilt yourself for having waited, says Bobbi Rebell, a certified financial planner, author of How to Be a Financial Grownup and host of the podcast, “The Financial Grownup.”

“It’s great to be buying and building equity, but just because you own a house, doesn’t mean you’re grown up financially or vice versa,” says Rebell. “It’s about making the smartest money choices for you.”

Finally in a place to take on this commitment? Congrats.

Here’s a primer on everything to know to make up for lost time.

Get in good home-buying “shape.”

Just like you’d never run a marathon without training first, you shouldn’t jump into buying a home without doing the prep, either. Spending the next six to twelve months increasing your financial fitness can help to ensure you set yourself up for the best possible home-buying outcome.

First, work on strengthening your credit score and refinancing any outstanding credit cards and remaining student loans to the lowest rates possible. This will help you lock in the best possible interest rates for a mortgage when you are ready to make the jump.

Next, find out what you can afford — NerdWallet’s online calculator can help you get a sense of the right mortgage rates to shoot for, along with homeowner’s insurance, property tax estimates and PMI, or the extra insurance you will need to take if you can’t make the typical 20 percent down payment.

The current wisdom is that a potential mortgage should be no more than 30 to 50 percent of your take-home salary after taxes, says Kelly Gushue, founder of the site Personal Finance Warrior.

Finally, build a plan to put away enough each month for a down payment and closing costs while building a healthy savings account. If that sounds impossible, consider temporarily moving to a cheaper neighborhood, taking on roommates or even moving back home with relatives.

“Take a year and do whatever it takes to cut costs and save,” advises Gushue. “It’s only temporary.”

Three-to-six months out, start researching homes in your area on sites like Zillow, Trulia, and RealEstate.com (a new site within the Zillow group designed for first-time buyers struggling with affordability) to get a sense of the market.

Figure out which type of loan will be best, but don’t psych yourself out.

In an ideal world, you’d stay in your home for five to 10 years in order to ride out market dips should they occur, and in that case, a 30-year fixed rate loan will likely will make the most sense. However, if you’ve got some uncertain variables like having to relocate for work or care for a parent in a few years, try not to stress.

“I ask my clients: Do they really think they’ll still be living in the same home in 30 years,” says Rebell. “Life is no longer like it was. People often sell sooner than they expect to.”

If you find yourself in analysis paralysis mode, worrying about every eventuality, take a deep breath. “I say, just make the best decision you can with the information you have now,” says Rebell.

“Worst-case scenario, you have to sell sooner than you expected, and you lose some money. At least you will have been building equity versus throwing money away in rent.”

This, too, might be when you first catch wind of something called Mortgage Protection Insurance. Once you’ve purchased a home, it is a good idea to make sure your loved ones will have the financial support to be able to continue making mortgage payments if you were to unexpectedly pass away, but be sure to choose the right kind of policy for your needs.

Often times, this will be a traditional life insurance policy rather than a mortgage protection insurance policy.

Shop around and don’t accept the first offer on anything, from agent commissions to closing costs.

Age trumps youth in many cases, but in home-buying, it pays to negotiate like a millennial.

Thanks to a more transparent market, millennials are doing their research online, and scoring better deals.

A December 2016 report from real-estate brokerage firm Redfin showed that 66 percent of millennial sellers have tried to negotiate with the listing agent for a lower commission, compared to 58 percent of Gen-Xers and 39 percent of boomers.

Nearly two-thirds (63 percent) of the millennials who tried to get a lower commission rate percent reported being successful. And in the same survey, nearly half of buyers said they were able to get a refund, closing-cost contribution or other consideration from their agent worth $100 or more.

“Check banks, mortgage brokers and online lenders for all the options and don’t be afraid to be assertive, especially if you’ve got a credit score over 740,” suggests Stefanie O’Connell, millennial financial expert and author of The Broke and Beautiful Life.

“Be prepared to negotiate on rates, closing costs and processing fees. Getting one waved could save you hundreds of dollars.”

Consider the pros and cons of the fixer upper.

The old adage that you should look for the worst house on the best block still holds true, and if you can score a home that costs about 20-25 percent less than what a property in good condition would cost you in the same area, you’ve scored a great deal. Consider what else you "get" with this place. Does it reduce your commute? Is it in a good school system?

Pro Tip: Set your home search settings to filter for properties that have been on the market for longer than 30 days to score a potential hidden gem.

Just be sure to work with your inspector to thoroughly check for issues, especially in the basement or on the roof, which can be the most costly to repair.

If you’ve got a lot going on, don’t feel as though you have to buy something right now just because the market is hot.

“I can’t tell you how many times I hear people stressing out because they feel like they have to jump on a deal or buy when interest rates are low or a neighborhood is gentrifying fast, but they’re also getting married, having a baby, and making job changes, says Rebell.

“It can get stressful and you’re bound to make mistakes.” Yes, interest rates are low right now, but just as often, people end up waiting and finding even better deals.

“The market is always fluctuating and life events are always changing,” says Rebell. “Concentrate on building a strong foundation in your personal life first, and then work on buying something when you’re ready.”

But, don’t wait for “the perfect time.”

Say you haven’t paid off your debt, but you’ve got a steady income, some savings, and can find a way to secure a down payment, it still might be a good idea to buy if you find a great deal where mortgage payments may be lower than what you’re paying in rent.

“Some people carry debt their whole lives, and if that’s the case, you could be waiting forever to buy a home,” says Rebell. “If you lose a job or end up on shaky ground, buying and building up equity could still be a better option, since if those things happen, you’d still be on the hook for the rent, anyway.”

Bottom line: Try not to compare and despair if you’ve waited a little longer to buy a home than your friends.

Chances are, you may be in a better position security-wise than those who jumped in before the housing bubble crashed. Plus, you’ve likely learned valuable lessons in life that will translate to your buying process now and help you make savvier decisions.

After all, good things often come to those who wait. 😊

Some big decisions take time. This one takes two minutes.

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Meghann Foye is a NYC-based writer covering personal finance, home and lifestyle topics. Her articles have appeared in Redbook, Good Housekeeping, Parents and Refinery29.com, among others.

Fabric Insurance Agency, LLC offers a mobile experience for people on-the-go who want an easy and fast way to purchase life insurance.

Meghann Foye

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