Delaying Your First Home Purchase? You're Not Alone

Harlan Landes, Contributor, Forbes

May 10, 2016

Delaying your first home purchase

You’re not alone if you’re young and don’t feel ready to buy a house. Despite pressure from older friends and family, it may not be the right time for you, and many millennials are in the same position.

The U.S. Census data show that only 34 to 36 percent of the population of adult Americans under the age of 35 owned a home in 2015. Compare that with the overall home ownership rate of 63 to 64 percent. There is a wide range of possibilities for the decrease in home-ownership over time. The increase in the price of real estate and the burden of household expenses is important, but so is the fact that many millennials are still feeling the effects of a recession in employment opportunities.

Along with underemployment or unemployment, millennials are delaying marriage. A household income increases when two working individuals become one entity, and any delay to a consolidated income adds to the lack of opportunities to afford a home.

That shouldn’t stop millennials from thinking about the potential for home ownership in the future. A delay is the perfect opportunity to prepare yourself for the time when you can afford to — and you decide you want to — own your first home. Many don’t start preparing until a home purchase is imminent. You can be in a much better situation by thinking far ahead.

Start building a good credit history now. With an established credit history in the future, millennials who delay their home purchase will have the opportunity to pay much less money over time for their mortgages than those who manage to qualify today with a shaky or empty credit profile.

Manage credit cards and other loans wisely, always pay on time, and never use credit to pay for something you can’t afford.

Create your own “mortgage payments.” Young people still living at home or renting are likely spending less on their housing on a month-to-month basis than homeowners. One way for millennials to get used to the reality of home-ownership is to adapt their budgets to accommodate another $500 in housing spending every month. That would cover everything from mortgage interest, taxes, and homeowners association fees to insurance and maintenance costs.

Instead of sending that $500 to a lender, the government, or a company, put that money aside in a savings account you don’t touch. It’s just like spending the money — it disappears from what you have available to spend on everything else. This establishes the habit of paying more for your house on a monthly basis.

And there’s a bonus: when you are ready to buy a house, you have a big savings account waiting for you to help you make a sizable down payment.

Observe the process. Millennials feeling the pressure to buy a first house likely have friends who are going through the process of doing just that. You can learn much by being involved or closely observing. Many first-time home buyers have nobody to guide them as they pursue a house from shopping to closing, and observation will help a young person be aware of some of the setbacks, difficulties, and frustrations.

With this knowledge, you’ll be prepared for dealing with the many variables in the home buying process.

Buying a house isn’t right for every person and family. If it is right for any particular millennial, today might not be the right time. The ability to evaluate oneself and one’s financial and living situation is important in making the decision. While you wait, you can continue to prepare yourself so that when the time is right, you will be in a solid position.

This article was written by Harlan Landes from Forbes and was legally licensed through the NewsCred publisher network.

The information contained in this article is provided to you “AS IS”, does not constitute legal advice, is governed by our Terms and Conditions of Use, and we are not acting as your attorney. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in or linked to this web site and its associated sites.

The views of the author of this article do not necessarily represent the views of First Republic Bank.