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

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.

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.

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%.

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.

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

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 finance, tech and tools, wellness and more, and follow us on Facebook, Instagram and Twitter to stay up to date.