Getting ready to buy your first house? Money Girl helps you make one of the biggest purchases of your life with 7 tips to get prepared, save money, and become a happy homeowner, no matter your age.
Buying your first house is a big decision. Not only is it a major financial investment, but the location of your home determines your community, neighbors, and perhaps where your children go to school. Becoming a homeowner isn’t for everyone—but if it is one of your financial goals, I recommend that you begin preparing as far in advance as possible.
In this post, you’ll learn 7 key home-buying tips to get prepared, save money, and become a happy homeowner. Plus, I’ll cover some generational trends and challenges that Millennials, Gen Xers, Baby Boomers, and the Silent Gen may face when buying a home.
7 Tips for Buying Your First House
- Know when to stop renting.
- Focus on building credit.
- Check into first-time home buyer programs.
- Estimate how much down payment money you’ll need.
- Save your down payment in the right place.
- Get preapproved for a mortgage.
- Be a savvy negotiator.
Generational Trends for Buying a Home
According to a National Association of Realtors study, 36% of home buyers are Millennials or Gen Y, who are age 37 or younger. And 65% of these buyers are first-timers who are also married couples. They’re increasingly buying single-family homes in the suburbs.
Gen X buyers, who range in age from 38 to 52, make up 26% of home buyers. The NAR report shows they are ethnically diverse, in their peak earning years, and purchase more expensive homes compared to other generations. They’re the most likely to choose homes based on convenience to work and the quality of school districts.
Younger Boomers from age 53 to 62 make up 18% of home buyers. They typically move for a job or to downsize after their kids leave home. Older Boomers in the 63 to 71 age range make up 14% of home buyers. They’re more likely to move the longest distances for retirement, to downsize, or to be closer to family and friends.
Those age 72 to 92 are part of The Silent Generation and make up just 6% of home buyers. Most have already retired and have the lowest income compared to other age groups. They’re more likely to purchase a residence in a senior-care facility than a detached home.
The process of buying a home is largely the same no matter your age. But keep reading for tips to overcome some generational challenges you may face and how to get the best home deal possible.
Tip #1: Know When to Stop Renting
Most of us start out renting because it doesn’t require a big upfront financial investment. But the downside to renting is that your monthly payments are a pure expense. In other words, once you pay rent, that money is gone forever.
When you own a home, it comes with some nice financial perks, including:
- Amortization, which slowly reduces your outstanding loan balance with every mortgage payment you make (if you have a fixed-rate mortgage) and helps build equity in your home.
- Appreciation, which allows you to build equity as the market value of your home rises over time.
- Tax deductions for mortgage interest and property taxes. You can deduct interest on up to $750,000 of mortgage debt on a primary or secondary home. Plus, you can claim a maximum of $10,000 per year for state and local taxes (SALT), which includes property taxes.
Additionally, when you own a home, you can have the lifestyle you want, spread out, and express your personal style.
But depending on where you live, renting may be more affordable than owning a comparable home. This is usually the case in big cities, such as New York and San Francisco.
Renting also comes with a convenient lifestyle, especially if you don’t like dealing with maintenance, doing yard work, or you travel frequently. So, no matter your age, knowing if you should buy a home really depends on:
- Where you want to live.
- The lifestyle you prefer.
- How stable your future income is likely to be.