Talking to Millennial Homeowners Who Just Bought Their First Home
Today I’m talking to my sister and my brother-in-law, who are 30 and 29 years old respectively and just bought a home in Silver Spring, Maryland.
So. Why did the two of you decide to become homeowners?
Well, we had been “dream looking at houses” for a few months. We had been thinking we would maybe start by getting a nicer apartment for a few years and then get a house. Then we started to look at prices and realized that we could get a house for less than a two-bedroom, or even a one-bedroom, apartment in the same area.
This is interesting because the D.C. metro area is kind of known for its high housing rates! Are you making the distinction between a house and a “good” apartment?
Or will your mortgage be about equivalent to what you are paying now in your “okay” apartment?
The mortgage will actually be less than the rent on our current mediocre one-bedroom apartment. However, we are buying a townhouse that has HOA fees each month, so the total monthly payment will be more than our current situation. But it will definitely be less than even a crappy two-bedroom apartment.
Do you think a lot of young professionals don’t realize this? Or do people just not think of homebuying as an option?
Our townhouse is at the end of the metro line in Maryland, so it’s not in a cool young professional neighborhood. A one-bedroom condo near our current place in DC would be close to twice as much as our townhouse. Also, a lot of young people probably aren’t ready to pay the down payment required for a house purchase.
Good, because I wanted to talk to you about that. I know you are both saver types, so I’m guessing you probably had a bunch of money saved to begin with. Did you do some extra saving for the down payment? Or did you look at your finances and think “okay, we can do this with what we have?”
We are both savers who have always lived below our means. So we both have been saving for many years and are both fortunate to not have student loan or other debts. We didn’t do extra saving specifically for a house, but rather just realized that we’ve got the money now to move forward with a purchase.
Did you also go to a bank for a home loan? I guess you’d have to, to get the mortgage.
Yes, our realtor recommended a couple of lenders for the mortgage and we ended up getting a really great rate because rates are at record lows, we have very good credit, and we’re putting 25 percent down.
That’s incredible. I was interviewing another homeowner in a similar situation, who had money saved up and realized buying would be cheaper than renting. When he moved out, he didn’t sell the home — he started renting it to other people. So he’s got a passive income source and is building equity. Is that something you might see yourself doing in the future?
It is a place we can see ourselves in for many years. If we decide to move for whatever reason we probably could rent it out. It’s in a quiet neighborhood within walking distance to a metro, so I’m sure it would be easy enough to rent.
But renting isn’t our current plan, it does require a fair amount of effort to maintain a rental property.
Very true. Okay, two more questions. First: What surprised you about the homebuying process?
We were surprised by how fast everything happened. We weren’t planning to buy something so quickly, but ended up finding the right house in the right location and at the right price. We found a realtor who is great and responds to us basically around the clock. That’s been a big help, since we didn’t know a lot about the home buying process before diving right in. We know other people sometimes spend months finding the right place, so our experience might not be typical.
And the last question: What advice would you give other people thinking about becoming homebuyers?
First look at the locations you really love. If those are beyond your price range, then it’s a good idea to expand your search a bit. We were first looking in one very specific area and realized that we wouldn’t be able to afford something there for many years. On that note, we’d also recommend not buying a place at the top of your budget. Houses have maintenance and utilities that you need to factor in your budget. It’s nice to have extra money to improve the house or save/spend on other things.
This story is part of our Real Estate Month series.
Photo credit: Brett VA