NEW YORK (MainStreet)—When 28-year-old Kevin Druce completed the purchase of his first home in Albuquerque, New Mexico in March, he didn't factor in the cost of landscaping.
"You don't realize the small things you'll need like landscaping when you buy a house for the first time," said Druce. "I've dipped into my savings, because the backyard was just dirt. I've planted grass and trees and installed a patio."
The three-bedroom home is costing Druce $223,000 purchased with a 3.5% down payment of $9,000.
"I thought it was a smart investment since I'd spend the same amount on rent," said Druce, who is a flight paramedic. "Why not have a mortgage? I'd like to own multiple properties in the future as a retirement set up. My fear is that there won't be any social security retirement income for me when I retire."
Druce is among the more than 50% of renters aged 18 to 34 who reported that the desire to own and build equity was the primary reason for purchasing a new home.
"The propensity for young adults to test the waters of homeownership continues to increase and has become more evident as renters are seeing the overall value of owning a home," said Deborah Wahl, senior vice president and chief marketing officer at PulteGroup, a builder.
The low mortgage rate environment, increasing rental costs and scarcity of desirable rental options, makes homeownership an even more attractive proposition for many millennials.
In fact, about 90% plan to purchase a home at some point in their lives, according to Pulte.
"It's important for first-time homebuyers to have access to the right tools and information to ensure their first home purchase is one they are proud of for years to come," added Wahl.
Below are tips for potential buyers to consider before buying a home:
--Written by Juliette Fairley for MainStreet
- 1. Know Your Financial Situation – Start saving for a down payment and talk with mortgage lenders about available loans well in advance of your purchase. There are federal, state and locally administered financial programs for new homebuyers, such as FHA and HUD loan programs that make buying a home more affordable. "The FHA program made it easier for me to become a home owner" said Druce.
- 2. Compare Owning vs. Renting – Buying can be smarter than renting from a financial standpoint, but it has other advantages as well. No more will noisy upstair neighbors be a problem or accidental scratches on the wall from decorations. Houses also tend to offer more storage space.
- 3. Weigh New vs. Used – New homes can be up to 30% more energy efficient, and popular options new homes offer today include more open, larger spaces, master bedroom suites, island-centric kitchens and bigger outdoor living space. "With a new home, if anything breaks within ten years, repair costs are covered with builder warranties," said Druce. "Everything is new in my home, and I got to pick the colors." If you're handy and don't mind a fixer upper, resale can be an attractive route as well.
- 4. Consider your surroundings. If you plan to start a family, research the local school district and other family offerings such as nearby parks and community centers. If you're a commuter, determine if the area is supported by adequate public transportation or provides easy access to major highways. "With many options to choose from, starting from a point of knowledge will go a long way towards achieving the dream of homeownership," said Wahl.
- 5. Confide in Trusted Sources – More than 90% of home shoppers today are plugged-in to the internet and use it as their main source of information. While this is particularly true of millennials, don't forget to seek advice from real estate agents and parents. "I have a friend who is a real estate agent in Las Vegas who told me about the FHA program," said Druce.