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Mortgages

82% of millennial first-time homeowners have regrets — here's how to avoid the most common one

Knowing what homeowners regret with their big purchase can help you steer clear of the same mistake.

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Tara Moore | Digitalvision | Getty Images

Millennials who managed the feat of becoming homeowners have discovered that their piece of the American Dream may have turned into a bit of a nightmare.

82% of millennial homeowners have at least one regret about their first home purchase, according to a 2023 Millennial Homebuyer Report by Clever Real Estate's Real Estate Witch. That's not surprising given the difficult hand dealt to this generation: two economic recessions and a historically expensive housing market driven by high demand and limited supply, followed by climbing high mortgage rates in 2022.

Given the challenges facing them, many millennials have had to be flexible and make compromises when buying a home that, in hindsight, may not have been worth it. Here's what millennials would take back if they could and how you can avoid the most common regret they have about their new homes.

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Millennials' home-buying regrets

Here's what millennial homeowners report regretting when buying their first home:

  • Paying too high of an interest rate (22%)
  • Not being educated about homebuying (21%)
  • Buying a home in a neighborhood that changed too much (21%)
  • Buying a home in a bad location (19%)
  • Not anticipating their future needs for a home (18%)
  • Buying a home too young (17%)
  • Living next to bad neighbors (17%)
  • Buying a fixer-upper home (16%)
  • Paying a too-expensive mortgage (14%)
  • Finding their home value decreased (14%)
  • Paying too much for home upkeep (11%)
  • Buying a home sight unseen (8%)

There are a handful of first-time regrets, but the most common is taking out a mortgage with too high an interest rate. The good news is that while you can't control the market's rates, you can take steps to increase your odds of scoring the lowest rate possible from what's offered.

How to prevent paying too high of an interest rate

As mortgage rates continue to inch down from their 2022 high, today's environment already makes it easier (but far from easy) for a first-time homebuyer to avoid paying too high an interest rate. But you don't have to sit around and wait for the ideal housing market to arrive.

First, you can make sure your credit score is in tip-top shape. Although you can get a mortgage with a low credit score, a better score increases your odds of snagging a lower rate.

Next, you can work on your debt-to-income (DTI) ratio, or how much debt you owe compared to your gross income. A lower ratio tells a lender that you have a healthy balance of debt to income. A higher ratio may indicate that too much of your income is dedicated to paying down debt. Lenders often use the DTI ratio to assess how much you can borrow and if you qualify for a mortgage, but it also influences the interest rate the lender will offer with the mortgage. The best way to get your DTI ratio down? Eliminate as much debt as possible and increase your income (if you can).

Finally, consider a shorter loan term when deciding what kind of mortgage you want. If you can afford the higher monthly mortgage payment, choosing a shorter 15-year loan term versus a 30-year term should result in a slightly lower interest rate since you're agreeing to repay the loan over a shorter period of time.

Rocket Mortgage offers home loans with terms as short as eight years and as long as 29 years — this lender also offers Federal Housing Administration, or FHA loans, with down payments as low as 3.5%.

Rocket Mortgage

  • Annual Percentage Rate (APR)

    Apply online for personalized rates

  • Types of loans

    Conventional loans, FHA loans, VA loans and Jumbo loans

  • Terms

    8 – 29 years, including 15-year and 30-year terms

  • Credit needed

    Typically requires a 620 credit score but will consider applicants with a 580 credit score as long as other eligibility criteria are met

  • Minimum down payment

    3.5% if moving forward with an FHA loan

Already have a mortgage through Rocket Mortgage or looking to start one? Check out the Rocket Visa Signature Card to learn how you can earn rewards

Other lenders, such as SoFi and PNC Bank, offer terms between 10 years and 30 years. SoFi also offers several lending benefits — a $500 discount for SoFi members and up to $9,500 in cash back when you purchase a home through the SoFi Real Estate Center — that could potentially offset at least some of the interest you would pay even if you decide to go with a longer loan term.

SoFi

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    VA loan, FHA loan, conventional loan, fixed-rate loan, adjustable-rate loan, jumbo loan, HELOCS & Closed End Second Mortgages

  • Terms

    10 – 30 years

  • Credit needed

    600

  • Minimum down payment

    3%

Terms apply.

PNC Bank

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    Conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, HELOCs, Community Loan and Medical Professional Loan

  • Terms

    10 – 30 years

  • Credit needed

    620

  • Minimum down payment

    0% if moving forward with a USDA loan

Terms apply.

And for those homeowners already paying a high interest rate, you can choose to refinance your home at a lower rate when rates drop.

Bottom line

Feeling remorse about something as important as your first home purchase shouldn't be embarrassing or shameful. It's a common occurrence, and hopefully, the list of regrets above will have you feeling less alone.

For those yet to make their first home purchase, you can learn from other's mistakes. Shore up your debt-to-income ratio and credit score to get the lowest mortgage rate possible. You can't control the market, but you can manage your own finances.

Catch up on Select's in-depth coverage of personal financetech and toolswellness and more, and follow us on FacebookInstagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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