A Millennial Home-Buyer’s Tips for Choosing Your First House

As housing prices continue to fall and mortgage rates have plummeted, I’ve had a lot of conversations with multiple friends my own age about getting into the housing market. I was one of the first people in my social group to buy a home (I won’t take credit for that; my spouse had to basically drag me along the whole time because I was so nervous), so I’ve had a lot of people asking me about my experiences and how to go about buying their first home. I won’t weigh in on whether you should enter the housing market right now. I’ll leave that to the experts. But if you’ve already decided that now is your time to buy, keep on reading.

So, how to actually choose a home? As the cliché goes: choose a house that’s right for you. While that may be true, it turns out there’s also a lot more to consider when purchasing a house. You’re buying a house that’s right for you, your spouse, your job, your dog, your kid, and maybe most importantly of all, your future buyers. Your priorities will be different depending on your lifestyle and situation, but there are certain things that everyone needs to be aware of when choosing which house to buy. If you’ve already been through the process, none of the following post will come as much of a shock to you. But if you have yet to buy your first home, you’re probably in for a lot of the same surprises my spouse and I had, so I want to give you a quick rundown of our experiences and priorities.

Probably the most important thing to keep in mind during your home-shopping experience is to set your priorities beforehand and stick to them. Our priorities went like this: price, salability, commute, location, size, condition, and aesthetic appeal.

Price

Unless you’ve got money running out your ears, this is probably going to be close to the top of your list. So if you have a spouse or partner, you need to sit down with them before you start your search and discuss what your budget will be. You’ll need to take into account things like your debt-to-income ratio, your credit score, the stability of your job, and the 28%/36% rule. Whatever you decide your budget is going to be, the most important rule of all is Stick. To. It. It’s super easy to be tempted by flashy granite kitchen counters and soaking tubs with jets. But before you know it, “a little over” can turn into “a lot over,” especially after you factor in taxes and interest and closing costs. A house always costs more than the listing price, so it’s important to leave a buffer in your budget to deal with the extras and never exceed your limit — not even by a cent.

However, there’s something even more important than following the general rules, and that’s living below your means. 28% of your gross income for housing is actually a lot (after taxes, it can get close to 40% of your net income), especially when you consider how tenuous most people’s hold on their job is in this day and age. I know I and a lot of other people my age watched our parents spend too much money trying to keep up with the Joneses only to get the rug pulled out from under them in 2008 — not to mention what’s now happening to all of us in the current COVID-19 crisis and its impending fallout.

While all that isn’t necessarily any single buyer’s fault, my spouse and I wanted to try to do what we could to avert financial disaster. So, before we even started looking at houses, we sat down and had a conversation about what a lower-risk budget actually looks like, and we decided that we wanted to keep our mortgage payment low enough that if one of us lost our job, the other one could cover all the bills without us going further into debt. This meant we lost out on some houses, we had to live farther away than we might’ve otherwise, and we ended up with a slightly older house than some of the ones we looked at — but we haven’t regretted it for a second. Like a lot of people, I lost my job during the coronavirus crisis, and it’s been a godsend to be able to live on one income without major financial issues. If we’d bought a more expensive house, that wouldn’t have been possible. You can buy a lot of gas and home improvements with financial peace of mind. So while the 28/36 rule is a good starting point, it’s important to remember that 30~% of your net income might be a better rule to follow than 30~% of your gross income.

Salability

This is a big one that I didn’t have much of a concept about before actually buying a home. On talking to our realtor, I discovered that there are a ton of things you have to look at when it comes time to resell. One thing that was surprising to me was that our school district was still super important — even though we don’t want kids — because school district is going to be a high priority for potential buyers in the future. If you have or plan to have kids, you’ll want a good school district for obvious reasons. But even if kids aren’t in your plans, you still need to prioritize good schools because those increase the value of your asset.

It’s also important to remember to buy a house with neutral colors and decorations if you’re planning to resell within a few years and you don’t want to do a lot of renovations. This means you might have to rethink a house you absolutely love, because if you absolutely love it, that means someone else will absolutely hate it. If you have a strong positive opinion about that hot pink accent wall or those funky kitchen counters, then there’s bound to be someone out there who has a strong negative opinion about them. But if you’re “meh,” then chances are most everyone else will probably be “meh” too. In this case, “meh” is good. “Meh” means your future buyers are taking mental pictures of all the improvements they could make if the house were theirs. “Meh” is better than “no” or “that’s awful.”

This one was especially hard for me to stick to when we found a fun ranch style house with a crazy black bathroom and a big multicolor brick fireplace with a giant Texas star in the middle. I love character and uniqueness, but a lot of other people don’t. A lot of people love sleek, post-modern minimalism, and I friggin’ hate it. That’s the point. In order to maintain salability, you have to buy a house that will be neutral enough to please almost everyone. So now I’m living in a house with off-white walls, snow-white kitchen cabinets, beige counters, and brown floors. It’s 100% meh. Even though I’ll replace the counters and the cabinets, when I do it, I’m going to go for the most neutral thing I can.

Commute

In my experience, this one might just cause the most contention if you’re buying with a partner. I work from home, but my spouse doesn’t, so I let him set the limit of how far he wanted to drive every day — and then I avoided exceeding it by the skin of my teeth. That one had more to do with price than anything else. Austin ain’t cheap, and the same house would cost three times as much in the city limits. The simplest thing to do is just decide how much time you’re willing to spend driving every day. If you don’t know for sure, try to look at it from a financial perspective. How much will gas and drive time and mileage and the general hassle of a daily commute cost you every day? Does it exceed the extra money you’d spend living closer to your job or not?

Location

Location is related to commute, but they’re not exactly the same thing. For example, my spouse and I looked at a couple different neighborhoods with a commute difference of five-ish minutes. One house was in a cramped development with six-by-six back yards and streets so packed with parked cars you could barely drive on them, and the other was ina more established neighborhood with houses much farther apart and farmland stretching out just beyond the back porch. The south side vs north side and east side vs west side can make a big difference in terms of safety, value, infrastructure, amenities, traffic patterns, and even weather. So remember that commute doesn’t equal location, and two neighborhoods roughly the same distance from work can have vastly different characteristics.

Size

I like houses in the goldilocks zone: not too big, not too small. Too small, and everything is cramped with people, pets, and stuff. Too big, and the maintenance and cleaning can spiral out of control and leave you with a shabby and dirty house. So it really just comes down to figuring out what your goldilocks zone is. We needed a master suite, a couple of guestrooms, and at least one dedicated office space. We also wanted a big enough back yard that our dogs could have enough room to run around. That was our minimum and maximum, cause it’s important to remember that no matter how great it is to have five bedrooms and seven bathrooms when guests come to visit, you’re going to have to spend either a lot of money or a lot of time cleaning and maintaining it. An overlarge house can also be a bad investment, since a lot of new buyers prefer smaller homes than they used to. The best piece of advice I can give is get the absolute smallest house that will accommodate your lifestyle and the size of family you want to have.

Condition

This one really depends on how many renovations and repairs you want to get into. I wouldn’t suggest buying a house with serious issues unless you’re really confident in your ability to flip it. Major fixer-uppers can be a lucrative purchase if you know what you’re doing or know someone who knows what they’re doing. But if you’re inexperienced, they can be a bottomless money pit from which there is no escape.

However, minor repairs and cosmetic issues can shave thousands of dollars off the list price. Depending on the nature of these issues, fixing them yourself can save you a lot of money. Even if a repair ends up costing as much as the problem took off the list price, it can still be worth it because you can control when you spend the money on it and whether you pay any interest on loans to fix it. Obviously if something is actively leaking or falling apart, it’s got to be fixed right away. Other things can wait a few weeks and months until you save enough to pay for repairs out of pocket.

For us, the AC unit in our house was out before we bought it. In Texas, that’s something that can’t wait. There was also wall-to-wall carpet over the whole second floor that we tore out and replaced (LifeProof floors are amazing). While some people find carpet more comfortable, when you have three dogs, it’s kind of a dealbreaker. Other things, like replacing ageing faucets and single-pane windows, can wait until we save enough money to pay outright to fix them.

Appeal

I put this in a separate category from salability because it’s more personal. While you certainly should focus on buying a sellable house, it’s worth noting that it’s perfectly fine to reject a prospective house for less practical reasons. I said no to one home because I didn’t like that they were all so close together I would have been looking into my neighbors’ windows if I kept the blinds open. We rejected another for a hump that ran across the whole the back yard. These are things that probably didn’t affect the house’s overall salability because there are plenty of buyers out there who wouldn’t be bothered by them. But they bothered us. Your house is an investment, but the reality is you’re going to be living in it, and there’s no point in buying a place you hate so much you can’t make it a home.

Final Thoughts

I will make one last suggestion: if this is your first time buying a house, it’s a good idea to hire a realtor. Once you’ve gone through the buying process a couple of times, you’ll be more familiar with how things work. But the first time can be overwhelming, and there are a ton of things that aren’t self-evident or are easy to overlook. So go online, talk to friends who’ve been through this before, even interview a couple of agents. Word-of-mouth turned out to be our best bet — if people have an opinion about their realtor, they’re usually pretty keen to share it.

A realtor isn’t just somebody who looks through house listings; they’re pros at homebuying and home-selling that will help you through every step of the process, from initial viewing to inspections to repairs to the legal and financial aspects of the purchase. Our realtor helped us get the previous owner to come down on the purchase price, pay for our new AC unit, and cover all our closing costs. If you find the right person, it might not cost you a cent, and it could even save you a ton of money.

Obviously, this article isn’t anywhere near a comprehensive guide to all things homebuying, but hopefully there are enough pointers to get you started. Just remember to stay calm, stay organized, and set your budget and priority list before you start looking. It’s easy to let emotions run high when you’re on your fifteenth house of the week and your partner loves one, you love another, and your kids love a third. That’s when the priorities you listed before you set out come in handy. Having a list you made in a calmer, more rational moment can be a big help when you’re tired or frustrated or excited or just ready to be done with all of it.

I know the process is scary and overwhelming, but it can also be a ton of fun too! Don’t let it intimidate you out of powering through. Once you’re settled into your very own house and building your own equity instead of lining real estate investors’ pockets, it’s totally worth it.