Homeownership has long been the American Dream, but millennials are struggling to take part in it. Limited wages and high levels of student debt have made coming up with a down payment next to impossible for countless young adults, leaving many with no choice but to continue throwing money away on rent.
Still, 46% of millennials do hope to buy a home within the next four years. At the same time, however, many are apprehensive about going that route. In a survey of 2,000 millennials conducted by Northshore Fireplace, millennials revealed their greatest homebuying-related fears, and these four topped their list.
1. The burden of paying a mortgage
Dealing with a monthly mortgage payment has 41% of would-be millennial buyers anxious about the prospect of owning a home. And given that half of millennials have only $2,000 or less saved for a down payment, that makes sense. Failing to put down 20% of a home's purchase price means facing private mortgage insurance, or PMI. PMI is a premium that gets tacked onto a mortgage payment, and its purpose is to protect lenders from borrower defaults. On the buyer end, it makes owning property more expensive, which is why it's best to save up 20% before signing a mortgage.
2. Unforeseen maintenance
A good 35% of millennials worry that unanticipated maintenance will make homeownership prohibitively expensive, and there's some truth to that concern. Owning a home means being responsible for every little thing that could go wrong, from minor issues to major repairs. That's why, as a general rule, buyers should expect to spend 1% to 4% of a home's value on upkeep. Newer homes might skew toward the lower, more affordable end of that range, while aging homes might hit that 4% threshold. Planning for maintenance and saving for it in advance can make the process of keeping a home standing less daunting.
3. Being locked into a single location
For 17% of millennials, being stuck in a single location is another major fear associated with homeownership. Buying someplace with a strong job market, however, can help alleviate that concern, as can buying in a thriving market where home turnover is abundant. That said, it's a smart idea to achieve some degree of career stability before buying a home. There are closing costs associated with taking out a mortgage, and generally, buyers need to live in their homes for several years to recoup those fees. Having a steady job makes it more likely that a given buyer will stay put for that sort of time frame, thereby minimizing the risk of monetary loss in the event of a quick sale.
4. General upkeep
Though unanticipated upkeep is a big source of concern for many would-be homebuyers, regular maintenance has 7% of millennials worried as well. Choosing the type of home that aligns with one's tolerance for maintenance is therefore a wise idea. Stand-alone properties, for example, require both interior and exterior maintenance (think lawn care and the like). Townhomes often don't have yards, so that's one less thing to worry about. And condos often charge a monthly maintenance fee that covers grounds upkeep and communal expenses like roof repairs, which means buyers can more easily lock in a large chunk of their ongoing costs.
Millennials' homebuying fears aren't unfounded. Thankfully, saving adequately for a down payment, understanding what upkeep costs are involved, and buying at the right time and in the right location can all lower the chances of buyer's remorse.