After an almost 12 percent increase in median home prices over the last two years, many California homebuyers are discouraged by the idea of saving for a home. In fact, a study by Redfin found that 50% of millennial homebuyers’ top concern is having enough money for a down payment.
Other concerns included affordability in a desirable location (45%), rising home prices (41%), and increased competition for bidding wars (28%). These concerns along with the inflated market have led over 65 percent of millennials to seek out a secondary income.
Median prices in the Los Angeles area have increased over 10% within the last year. Not to mention, Southern California homes receive about five offers which has caused home shoppers in the area to be concerned about their ability to purchase a home.
With competition increasing and prices rising, how can you improve your chances of submitting a winning offer? And more importantly, what financial tips can give millennials an advantage when searching for homes?
Here are a few tips to ensure you find the right home at a manageable price:
Get Pre-Qualified For a Mortgage
Unless you’re paying entirely in cash, get prequalified for a mortgage before you start looking at homes. You can usually do this over the phone or online and your mortgage broker will take a look at your finances and credit history to determine how large of a loan you qualify for and what your mortgage rate will be based on your down payment.
At the same time, however, don’t assume that you’ll be able to afford a more expensive home than you initially thought just because you qualified for a larger loan than you expected. Keep a close eye on the monthly mortgage payment. If you can’t afford that, then you can’t afford the home. This step will set your budget and help define the parameters for your house hunt.
Once you know your budget you’ll be prepared to act quickly and decisively to quickly snatch up the house once you find it.
Look To the Future
Be sure to consider what you need out of the house in the future and not just right now. Are you going to be living here for a few years or a decade (or more)? Are you planning on having kids in this house? Do you need a yard for dogs? All these questions and more are ones you need to think about when you’re looking to buy your first home as they frequently get overlooked by first-time homebuyers, which will inevitably lead to problems down the road and perhaps a premature move.
Similarly, keep your potential return on invest (ROI) in mind when you’re house hunting. It’s easy to only look at the value of your potential first home as it is now but also take a look at the trend in the neighborhoods property values. Is your house in an up-and-coming neighborhood? The homes in some neighborhoods will appreciate at a faster rate than others, something that will come in very handy when you’re looking to upgrade a few years down the road.
Learn the Lingo
Learn all the real estate lingo. There are so many real estate-specific terms that it might as well be a new language. That is a language you’ll have to learn though if you want to have a clearer understanding of the home buying process and understand exactly what it is you’re paying for at various stages of the process.
Find a Good Home Inspector
Whatever you do, don’t forget to hire a good home inspector. Every home has its secrets and there is no exception. You don’t want to move into your new home only to find that it needs thousands of dollars in repairs. So be sure to hire a reputable home inspector and ask them these 10 questions put together by the U.S. Department of Housing and Urban Development.