Millennials are becoming home owners

Fresno Bee
Fresno Bee
Posted: March 10, 2014

A National Association of Realtors survey last year showed that millennials, at 79 percent, were the largest group of first-time home buyers.

Inevitably, more members of this generation - commonly defined as born between 1980 and 2000 - will follow suit, leaving apartments or their parents' basements in pursuit of places to call their own. They will begin a process that can be tedious, time-consuming, and sometimes quite exasperating.

Mortgage preapproval, house selection, price negotiation, loan acquisition, appraisal, inspection, price renegotiation (after the inspection), settlement - it will likely be different from anything they've ever experienced. And HGTV's lineup of real estate shows doesn't give the lowdown on the whole process.

So patience is not just a virtue, observers of the real estate scene say, it's a necessity. Another one: Relearning how to communicate. To text, or not to text?

In real estate, the prevailing posture is mano-a-mano - a skill that, once learned, will work to the millennial buyer's benefit, the experts say.

Texting "drags out the process," said Christopher Swartz, vice president of Keystone Funding in Media, while a 20-minute phone or in-person conversation can answer all questions for a mortgage preapproval.

In this market, in which homes are selling in a few days or less, "you could miss out on an opportunity," Swartz said.

Millennials also should ignore their preference for keeping their distance during the house-hunting process, said Stephen Ferguson, of Berkshire Hathaway Home Services Fox and Roach in Center City. Yes, texting can work, but they must include in their reply texts or e-mails the time and date for a meeting, and not just the day of the week.

The problem, Ferguson said, is that society is "inundated by communication. It becomes overwhelming."

That said, market observers love the millennials' love affair with technology. "It makes the mortgage process more streamlined," Swartz said.

Though their baby-boomer parents may prefer to drop documents off in person, their parents also can find those documents in seconds, while millennials must hunt them down.

"The millennials need more experience," Swartz said. "With boomers, it could be their third mortgage."

Debt is one thing many millennials have vast experience with.

"The credit load is student loans and the car," said Paulette Kreider, of Keller Williams in Media. "Their student loan [bill] is about $300 a month. I am seeing really good incomes. They are meeting that 43 percent threshold" of income to debt.

Jeff Harris, vice president of Freedom Mortgage in Moorestown, noted that the credit-reporting agencies Experian, Equifax and Trans Union will raise or lower someone's credit score just by the date on which a credit-card bill is paid.

The best way to improve a credit score and reduce interest charges, he said, is to make two smaller payments each month.

The reason: You have a better chance of dodging score-lowering bullets. Paying off a balance after the fifth of the month may show a "high percentage utilization" of your credit card, Harris said. Paying off some of your bill between the fifth and the 20th, when the credit agencies' records are updating, could lead to lower credit scores.

If you want to pay off your bill, do so before the first of the month, he said.

Millennials often get financial help from family at settlement. But that can be a mixed blessing, because not all mortgages are created equal.

For example, the Federal Housing Administration will allow the down payment and closing costs to be considered a gift, Harris said, but FHA also requires more expensive monthly mortgage insurance than a conventional lender might.

"That heftier insurance payment can make it more difficult to qualify for a mortgage, from a debt-to-income standpoint," he said, because the cost will be included in the debt calculation.

Who owns the house once you've sorted out the mortgage?

Married millennials, like other couples, hold title jointly; if one dies, the surviving spouse owns it wholly. But if you're not married, resolve the issue at settlement, the experts said: Get it in writing, on the title.

It can be handled two ways: If one partner dies, that share of the house is left to his or her heirs. Or the surviving partner can inherit the dead partner's share - in which case, Media estate attorney Dennis Woody said, the surviving partner must pay inheritance taxes of 15 percent.

"They have to make sure they put in [the title] what they want," Woody said, "so they understand what they are doing."

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