In the Market: Real budget vs. dream home
This weekly feature is a real estate information roundup from a millennial’s point of view. When a young professional moves from Indianapolis (median home price $125K) to San Francisco (median price $1 million), you can expect an adventure. Nneka Madus, an analyst in Bank of the West’s Mortgage Division, did just that and has plenty to share in her quest to own a home in San Francisco.The end is (almost) near: You’ve been pre-approved for a mortgage, found your dream home, and now you’re ready to put in your offer. This may be the most nerve-racking phase in the home buying process, and as a first-time homebuyer (or in a competitive market), you may feel like you need to rush to seal the deal. Check out Sandy Gadow’s article in the Washington Post that may help you avoid surprises near the finish line. Gadow gives you the scoop on what you may need to know to make a compelling offer, describes the purchase agreement, and explains why you may want to place contingencies. My takeaway: Contingencies may be key in some cases. And what if your dream home and real budget don’t match? I told you all that I just rented my first apartment, right? I love my apartment and live in a super trendy neighborhood. It’s a quiet area, but really close to shopping, nightlife, and Starbucks. Even the bus I take to work has a stop right outside my door; the location cannot be beat. My apartment is newer and super spacious (by San Francisco standards). I live in my dream apartment, but my goal is to live in my dream home, which would have all of the characteristics I listed. But I’m realistic — I know that I probably won’t be able to afford my dream home on my current budget. In this Forbes article, a Trulia contributor outlines seven ways to match your dream home to your budget. I’ve told you what some of mine are; what are some dream home have-to-haves on your list? Millennials are not buying homes like experts expected. I agree with some of the common factors experts have laid out — many of us got a late start in the job market, and student loan debt also hampers many of us. However, I think there is one other major reason that experts fail to recognize. We simply don’t know what it takes to get a mortgage; we seriously lack financial literacy. According to the 2012 Program for International Student Assessment (PISA), U.S. 15-year-old students ranked below average in financial literacy. I remember signing up for credit cards in college simply because they offered a free T-shirt — forget asking about the APR or fees. I think a lack of mortgage education may also play a huge role as to why more millennials and other first-time homebuyers haven’t jumped into the market. Geoff Williams from US News and World Report challenges five mortgage myths that may be preventing people, like you and me, from seriously considering a home purchase. Why aren’t more people hopping on the mortgage train? Bloomberg News’ Noah Buhayar quotes Warren Buffett in his article, “You would think that people would be lining up now to get a mortgage to buy a home.” He thinks it’s a no-brainer to get a mortgage now while rates remain relatively low. So why aren’t we listening to the man known as the “Wizard of Omaha”? I’ve read so many articles on why people aren’t buying homes: owning a home isn’t affordable right now, stricter lending standards, low housing inventory, and reluctance to make a lifestyle change. If you’re renting and want to own a home, what is preventing you from buying? Is affordability the culprit? Is there something that Buffett failed to take into account? I’m interested to hear.