Almost 70% of millennials regret buying their homes. Here's why
Millennials aren’t exactly jumping for joy after purchasing their homes.
About four in 10 millennials are already homeowners, according to a new survey of over 600 millennials (age 21-34) by Bank of the West. Yet it turns out that 68 percent of them are feeling buyer’s remorse — almost double the amount of Baby Boomers who say they have regrets.
“Millennials are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face,” says Ryan Bailey, head of Bank of the West’s retail banking.
Here are the biggest areas of remorse.
Overspending on the down payment
Roughly four in 10 millennials felt they made poor financial choices when it came to purchasing their home. Part of the problem seems to revolve around the down payment. The survey found one in three millennials dipped into their retirement accounts to pay for their homes — a trend Bailey calls “alarming.”
“Borrowing from your retirement may make sense in special circumstances, but it’s definitely not a recommendation,” Bailey tells CNBC Make It.
To keep from getting squeezed, think about what you can afford as a monthly payment, and don't forget to include taxes and insurance in your calculations, Danielle Hale, chief economist for Realtor.com, tells CNBC Make It.
Use filters on home search sites and price alerts to make sure you're not shopping for a home above your budget. "Don't fall in love with something that's already out of your price range," Hale says.
Underestimating ongoing costs
When you buy a home, the expenses don't stop once you move in.
Millennials understand basic costs, such heating and electric bills, but Bailey recommends also considering how much time and money it could take to mow the lawn, clean the house or deal with leaky faucet.
“When you’re a homeowner, you can’t call your landlord to fix things, so you want to make sure you have a little extra cash in the bank,” Hale says.
It's a big transition going from renter to homeowner, so make sure to take some time to learn about the maintenance costs associated with potential homes.
Settling for something that's not quite right
Finding the right fit is as important as having the right budget when it comes to home ownership. The survey found that about half of millennials had regrets about the home itself.
One in five said they were frustrated by damages they found after moving in, while others said they discovered the house didn't end up working well for their family.
To avoid unexpected expenses, experts recommend getting a home inspection before finalizing the sale. "Especially if you're a first-time buyer or new to home ownership, you may not even know what to look for, so you definitely want to have the expert on your side," Hale says.
It can also help to nail down what you really need in a home. Make a list of your must-haves before you start looking and know what you're willing to compromise on, Hale says. It's currently a very competitive market, so chances are, you're going to have to make compromises.
In fact, about two-thirds of home buyers reported compromising on some sort of home characteristic, according to a survey from the National Association of Realtors.
"The more targeted your search is," Hale says, "the more chance you won't waste your time or get distracted by homes that ultimately aren't a good fit for you." Follow this advice, and you can avoid purchasing a home that you regret.
Don't miss: How an often overlooked part of owning a home can cost you an extra $6,000 or more a year
Like this story? Subscribe to CNBC Make It on YouTube!