HGTV vs. reality: Lessons from millennial homebuyers


Taylor Milam

Taylor Milam

Blog author Taylor Milam

Taylor Milam is a personal finance writer who recently paid of $14,000 of student loans. She helps millennials with money and spending at The Freedom From Money.

Published September 21, 2017|5 min read

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Buying a home is simple — at least according to popular reality TV shows on channels like HGTV. The first bid on a property is always accepted and renovations rarely extend past the estimated timeline. Plus, everyone hugs at the end!

Of course, the truth is smooth financial transactions are the exception and not the norm when it comes to buying a home. To illustrate how the whole process can actually play out, three millennial homeowners, who have recently went through their house hunts, share what they’ve learned from the experience.

1. Expect the unexpected.

When Emilie Cleaver, 26, from Wilmington, Ohio decided to buy her first home earlier this year, the homebuying process moved much faster than she had initially expected.

“I was expecting the process to take at least thirty to sixty days and it actually took much less ,” Cleaver says. “Because I found the house I wanted so fast, I am breaking my current lease and will have to pay about $1,800 for two months of additional rent.”

And that’s just the tip of iceberg when it comes to ancillary costs, which includes everything from a mortgage application fee to moving expenses and homeowners insurance.

“The other expenses haven’t necessarily been unexpected, but they have added up,” Cleaver says. “I had to pay about $400 for the home appraisal and $75 for a first-time homebuyers class. I’ll also have to put in a fence for my dog, which I'm estimating will cost between $1,000 and $2,000.”

2. Save more than you think you need.

Cleaver’s story illustrates a golden rule when it comes to buying a home: Saving extra money is always a good idea. In fact, according to Cathy Derus, Certified Public Accountant and founder of Brightwater Financial, prospective buyers should put as much money as possible towards the down payment — ideally around 20% — “without stretching themselves too thin,” but that’s just the beginning.

Derus also recommends homebuyers save 2% to 5% of the total cost of the home for the closing costs and an additional 10% to 20% for yearly home maintenance costs. For a home that costs $300,000, this could mean saving as much as $105,000 in cash.

3. Sometimes a deal just isn’t quite right.

After a stressful experience with sellers who refused to do necessary repairs, Ben Luthi, 31, a writer for Student Loan Hero, made the decision to buy a new construction home in his hometown of West Jordan, Utah instead.

“It's a seller's market right now in Utah, so buyers don't have a lot of leverage,” he says. “We were under contract for the home, but ultimately decided that it wasn't worth the investment and backed out.”

Backing out of a housing contract can cost you. Luthi, for instance, had to eat the cost of his appraisal ($450), which took place before he decided to end the deal. But there are times where it might be best to just cut your losses. Case in point: Luthi was able to get back the rest of the money he laid out upfront because the seller hadn't disclosed all the issues that were found in the inspection. (If your instincts are telling you something up is up, talk to your realtor or real estate attorney about the repercussions of breaking your contract or what options are at your disposal before formally pulling the plug.)

In the end, for Luthi, the about-face turned out to be a smart financial decision.

“When we were under contract earlier this year, we were looking at a 3% down payment," he says. "Now, we have enough to put down 10% and it resulted in more than a 2% decrease in our interest rate and $100 less per month on the payment — and our current loan is bigger than the previous one.”

4. Don’t rule out buying just because you think it’s cheaper to rent.

Buying a home is an expensive decision — but that doesn’t necessarily mean it’s a bad one.

Coming from San Diego, California, Lauren Swann, 27, was used to a high cost of living, but when she moved to Charleston, South Carolina for work, she wasn’t prepared for a $300 rent increase over the course of one year.

“With interest rates low, I calculated with my mortgage company what I could afford and what my mortgage would be,” she says. “Turns out my mortgage would be the same price as my new rental price. I figured that as long as I could afford a down payment, it would be a better investment to build equity over the next few years.”

Swann’s situation isn’t as unique as you may think. In some larger metros, if you can safely afford a 20% down payment, have good credit and enough cash to cover closing costs, it’s often cheaper to buy than rent. (You can find some easy ways to save for a new home while renting here.)

5. Your dream home could be financially worth waiting for.

Once she made the decision to buy, Swann was faced with another interesting choice: It was $15,000 cheaper to buy a new construction home. She decided to save the money and made the choice to go with a new build.

“Since I ended up doing a new construction home, I used the six months of building to save up an additional $4,000 to go towards my down payment and I found a roommate who is going to live with me and pay half the mortgage,” she says. “Having the tenant has freed up funds to buy new furniture, hire a cleaner and splurge on cable.”

Even though the process might not be as glamorous as it appears on TV, with smart financial planning and a commitment to saving, these millennials prove buying your first home can still be an exciting and financially savvy adventure. Of course, there are plenty of ways to get creative with your housing situation. Here’s how a few other millennials are getting savvy about making rent.

Image: Alex Potemkin