Let’s Help Our “Kids” Become First Time Home Buyers

The world I live in today, as a Gen X adult, is very different than the one I grew up in. A college education isn’t something that you can take for granted, given the cost. Getting a job post college that covers living expenses let alone providing an opportunity to build wealth, is not guaranteed. Becoming a homeowner is not something that everyone who is working can do.

As a realtor and a mom of two adult children, one age 18 and in the Marines, and the other coming up on 21 and a junior in college, I am passionate about helping them, teaching them how to buy their first homes, teaching them how to build wealth through real estate, and constantly instilling the hope in them that they can own their own home and be better off than the generations that came before them. There is a lot of doubt and skepticism in the minds of their generation right now, and I want to do everything I can to give them positive hope.

As a result, I have been thinking a lot about how I can help them. As the homes that most first time homebuyers can afford are few and far between (Our median home price for the last year in New Hanover County is $389K, median 5 days on market), and I don’t see that changing significantly, I’m thinking of ways to help them build wealth and be able to own homes. Here are my thoughts on how we can help them.

1. Start educating them as early as possible. Personal finance, wealth building, home ownership, investing – most schools do not teach these topics. Unless they learn at home, they will learn the hard way, and they do not have the same luxury of time that we had as young adults.
2. Help them start building their credit scores as soon as you can. You can add them to a credit card of yours, make sure you pay it on time, preferably pay it off every month, and do not let the balance get above the 50% of available credit. I was shocked by how quickly this helped my daughter’s credit score, going from no credit to a score of 716 in just a few short months. Once they have some credit established, you can help them get a credit card in their own name. Depending on how responsible they are and your relationship, you can keep it or let them manage it. Just use it for gas or some small monthly expense, and make sure they pay it off every month. I’m all about teaching them to be responsible for themselves and managing it themselves, but you know your kids best, so do what’s best in your situation.
3. I’m very much a subscriber to the no consumer debt Dave Ramsey line of thinking. That said, I do want my children to establish credit because I do not see them being able to buy homes without it.
4. Borrowers do not always need two years of employment history to get a mortgage. If they are coming out of school, they may be able to use college transcripts and a verified employment letter to qualify for a mortgage.
5. North Carolina has several first time home buyer programs. With these programs, first time home buyers can get some or all of a down payment covered, largely reducing the amount of cash they need to close on a home. There is also a $2,000 tax credit program available. And remember, a first time homebuyer is anyone who has not owned a home in the last three years, so your older adult children may qualify as well.
6. Teach them not to buy something that they really can’t afford, even if they qualify for the mortgage. They will need to have a plan for regular maintenance and unexpected repairs. Home warranties may be a good option if they are short on cash. Help them understand the costs of owning a home, above and beyond the mortgage payment, so that they can understand their budget.
7. Use all the programs that are available and teach your kids about them. If you are in a situation to give them the cash they need for a down payment, that’s great. I know a lot of people out there, especially if you are just finishing up paying for college at $20K a year or so (and that’s in state public tuition), may not have the money to help them get started with home buying right away. That’s okay – help them find a way.
8. Consider buying a home in the town where they are in college, and renting out the other bedrooms, instead of paying rent for 4+ years. You can hold on to it after graduation as an investment for yourself, or use any equity to help your recent graduate buy their own home.
9. Remember that these housing price trends are predicted to continue by the industry experts. We may be in a shifting market, but for the long term, they are likely to continue to rise and unfortunately, price some people out of the market. Let’s help our children get started responsibly, and as quickly as possible. If you had bought and held a home when you were 22, how would that have affected your financial health today?
10. I think the hesitation for some young adults may be that they do not want the responsibility and hassle of buying a home, when they may be leaving the area or moving around in their 20’s. It may not be for everyone. But for a lot of people, it may be worth the potential inconvenience to be building equity instead of paying rent, and to get into the real estate market sooner rather than later. If they move away, they can rent the home, or sell it if the economics of that make sense.

I am really passionate about helping first time home buyers realize that they can buy homes before they think they can, with less money than they think they need, and with less credit and employment history than they may realize. Also, I like to stick around after the purchase and help them learn what they need to know to maintain the home, so that they can sell it for the most amount of money possible when they are ready, and continue on their wealth building journey. Home ownership at a younger age may not be for everyone, but let’s at the very least, consider it as an option and teach our children to do the same.

If you have any questions, please email me (kim@thecoastalrealestategroup.com) and we can talk through them!