Millennials, ages 26 to 42, are moving away from renting and toward home ownership. According to a study by RentCafe, 52% of millennials own a home, which was the largest generation in the U.S. to transition from a renter-majority to an owner-majority in 2022.
If you are a millennial looking to invest in your first property, here are a few ways to maximize your investment.
Use a mortgage calculator/work with a lender to calculate your monthly costs
The most important step in the home-buying process is determining if you can afford the investment. Use a mortgage calculator to calculate your monthly cost. You might find that home ownership is cheaper than your rent, but even if it’s more expensive, keep in mind that it is a long-term investment in your future.
Also, consider additional costs for home ownership including HOA fees and home maintenance. Make sure you are factoring all elements into your monthly cost.
See if you qualify for a first-time homebuyer loan
One popular loan type for first-time homebuyers is an FHA loan. It provides flexibility for individuals who do not have the funds for a large down payment. The one caveat is that you must pay an “Up-Front Mortgage Insurance Fee” as well as a monthly mortgage insurance premium (MIP). The upfront mortgage insurance fee can be financed into your loan and a portion of it may be refundable if you do an FHA refinance within the first three years.
You can also refinance your home at any point. As you boost your credit and become a trusted borrower, you may be able to get a better interest rate later down the line. Keep an eye on your credit score and discuss this possibility with your lender.
Invest in a city that will give you a good ROI in the future
In Arizona, it is always a good idea to buy in popular cities like Scottsdale and Phoenix. However, it’s also great to look on the outskirts of these hot spots to find the new up-and-coming neighborhoods. One example of this is the Town of Queen Creek. Neighboring Gilbert and Chandler have already flourished and many families are settling down in Queen Creek as it continues to grow.
Calculate your commute to work and loved ones living nearby and see if it’s worth it to buy slightly outside of your radius to save money and invest in the future of a neighborhood.
Consider your long-term family plans
You want to purchase a home that you can grow into over the next five to 10 years. Think about the following questions when determining the size and location of your home:
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Do I need/want roommates to help me pay the mortgage?
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Am I getting married/having a family soon where I’ll need extra space?
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Are there good schools in the neighborhood that my children can attend in the future?
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Do I want to be close to my parents/grandparents/family?
Sometimes, you can find the perfect home in the short term, but this is a big investment. Make sure you are honoring your future and goals before signing the contract.
Overall, homeownership is a great way to start investing in yourself. In Arizona, we have seen how home prices have skyrocketed over the past few years and the Phoenix area will continue to be a hot market. Work with a trusted lender to ensure you have the right resources to make a sound investment.
Jennifer Folk is chief operating officer of Minute Mortgage and has more than 20 years of mortgage experience.
