Mistakes Homebuyers Made by Generation

In recent years, there has been an increase in the number of first-time homebuyers. However, many of these buyers are making the same mistakes. 

A homebuyer is defined as someone who purchases a house or other type of residence. There are many different types of homebuyers, and they can be classified by generation.

The baby boomer generation

• largest group of homebuyers
• defined as those born between 1946 and 1964
• Baby boomers are known for being independent and self-sufficient.
• They are also the most likely to have the financial resources to purchase a home outright.

Generation X

• is the next largest group of homebuyers
• defined as those born between 1965 and 1980
• Gen Xers are known for being resourceful and adaptable.
• They are also more likely to have families and pets, which can impact their housing needs and choices.

Generation Y or millennials

• is the smallest group of homebuyers
• defined as those born between 1981 and 1996
• Millennials are known for being tech-savvy and value convenience.
• They also have the lowest median income among all generations.

Generation Z or iGen

• is the last group of homebuyers.
• defined as those born between 1997 and 2007
• iGens are known for being tech-savvy, but also very cautious with their money.

The U. S. Census Bureau defines different generations by the year, or decade, of a person's birth. Age and life stage are important factors to consider when determining which generation best describes you and your home buying needs.

Baby Boomers: Leveraging equity, waiting to buy

As the children of the Great Depression and World War II, baby boomers are used to being frugal. So it's no surprise that when they enter retirement, they're still looking to save money where they can.

And as the population ages, more and more people are finding themselves in the position of being a first time home buyer at an age when their parents may be retired or nearing retirement. This can be both an advantage and a disadvantage. On one hand, they may have the financial resources to buy a home outright or to make a larger down payment than younger buyers. On the other hand, they may be less familiar with the process of buying a home and more likely to make mistakes.

For many boomers, their home is their largest asset. And as they approach retirement, they may be considering leverage that equity to help supplement their income. But experts say there are a few things to consider before taking out a home equity loan or reverse mortgage.

For one, waiting to buy into retirement can be advantageous. "Boomers who downsize or right-size now may have trouble finding their dream retirement home later," says Scott Humphrey, president and CEO of the Mortgage Bankers Association of Greater Kansas City. "If you wait too long, you may not have as many options."

"It's important to think about what you want out of retirement and whether or not that home is the right fit." And then there's the question of affordability. "You need to make sure you can afford a mortgage payment, property taxes and homeowner insurance," Humphrey says. "If you can't, consider purchasing a home with a lower price point. There are also a number of government programs available that can help."

Gen Xers: Overspending, skipping pre-approval

A recent study shows that generation X is more likely to overspend and skip pre-approval when buying a home. This is a mistake that can lead to financial difficulties down the road.

Generation X is known for being independent and resourceful. However, when it comes to buying a home, this can sometimes work against them. Many Gen Xers are reluctant to ask for help or advice, preferring to go it alone.

This can lead to problems when it comes to budgeting and making sure they can actually afford the home they want. Skipping pre-approval is another mistake that Gen Xers often make. This means they could end up paying more for their home than they need to.

Millennials: Underestimating costs, overconfident

Millennials are the most likely to underestimate costs, according to a new study. They're also the most confident about their ability to buy a home.

The study found that millennials are more likely than any other generation to underestimate the costs of buying a home by $50,000 or more. They're also more likely to overestimate their credit score by 20 points or more.

Despite these underestimations, millennials are more confident than any other generation that they'll be able to buy a home in the next five years. Sixty-two percent of millennials say they're "somewhat" or "very" confident they'll be able to buy a home in that time frame, compared with just 50 percent of Gen Xers and 41 percent of baby boomers.

"The good news is that millennials are optimistic about their ability to buy a home, but there's still some significant barriers," says Emily Stancil, director of homeownership and lending access at NeighborWorks America. "They need to start saving early and budgeting for the down payment. They also need to make sure they're getting the best deal in terms of their monthly payments, and look for a competitive interest rate." A recent survey from Bankrate shows that only 48 percent of millennials have started saving for a down payment.

Sixty-three percent of millennials who don't own homes believe that their credit can be improved in order to become a homeowner, but only 28 percent of those surveyed said they've taken any action to improve their credit. That's a problem, because your credit score is one of the most important factors that lenders look at when deciding whether to give you a loan. In fact, it's estimated that 90 percent of mortgage applicants will be disqualified if they have a credit score less than 620.

To build your credit before you apply for a home loan, it's important to pay your bills on time and keep your credit card balance low. You can also consider opening additional lines of credit, such as a store card. The good news is that almost half of the survey respondents said they expect to be debt-free by age 30, so if you follow their lead you could be mortgage-free too.

iGen: Unrealistic budget, skipping pre-approval

The iGen, or Generation Z, is the demographic cohort after the Millennials. They are digital natives who have grown up with technology and the internet. This has led to them being more independent and resourceful than previous generations. However, they are also more likely to make mistakes when buying a home.

One mistake that iGens make is not getting pre-approved for a mortgage. With online tools and instant gratification, they assume that they can just go online and get approved for a loan. However, this is not always the case. It’s important to meet with a lender to get pre-approved for a mortgage before beginning your home search.

Another mistake that iGens make is not being realistic about their budget. Just because you can afford the monthly payment doesn’t mean you can afford the home. You need to factor in all the other costs such as closing, property taxes and insurance. If you can't afford a home because of the cost, you’re better off renting than going into financial ruin. For example, the median price of a home in the U.S. is $200,000. With a 20% down payment, you need to come up with $40,000 for closing costs and other fees associated with getting a mortgage.

6 Reasons Why Rent to Own Homes Are a Smart Idea

That's a hefty sum for most iGens, so if you can't afford a house in your price range, it's best to rent rather than buy. Finally, if the home you are looking at requires a lot of renovations and repairs, don't forget to factor those into your budget. This will save you money and headaches in the long run.

Conclusion: Homebuyers of Any Generation Can Avoid These Mistakes 

When it comes to buying a home, there are certain mistakes that can be made regardless of what generation you belong to. Therefore, it is important for homebuyers to take the time to learn from their mistakes. By doing so, they can avoid making the same mistakes in the future and can make more informed decisions when buying a home.

In conclusion, homebuyers of any generation can avoid these mistakes by being mindful of the potential pitfalls during their search. With a little research and patience, any homebuyer can find their perfect home without making these common mistakes. Here at RTO Listing, we help you avoid these mistakes!