Alan Rosenbaum is never surprised when one of his Generation X clients comes to him with a long list of financial questions about buying a home. Rosenbaum, founder and CEO of GuardHill Financial Corp. in New York City, says consumers face a different set of questions and challenges when buying a home in their 30s and 40s than they do when purchasing a starter home in their 20s.
"Buying a home is a big decision no matter what age you are, but when you're older and buying a home you tend to have a family started and you tend to be more set in your career. Buying a home can impact all of that."
Here are five key factors that buyers in their 30s and 40s need to consider when buying a home:
No. 1: Don't tie up all your money
Many buyers drain all of their savings when buying a home. Blame down payment, closing costs and new furnishings.
This leaves buyers vulnerable to major unexpected expenses or events like a major surgery for a child or the loss of one of the homeowner's income due to a job loss or disability," says Keith Baker, a mortgage banking professor at North Lake College in Irving, Texas.
Pouring all of your savings into a purchase, especially retirement savings, is increasingly dangerous to buyers with teenage children as saving for college is likely to be a top concern, he says. If your savings is at risk, Baker recommends that you find a home at a lower price point or one that will require less upkeep to preserve your savings.
No. 2: The future can be costly
Brian Koss, executive vice president of Mortgage Network in Danvers, Massachusetts, says that because older buyers are more established in their careers and tend to be earning more money, they can often qualify for larger home loans.
"Just because you can qualify for it, doesn't mean that a [larger] mortgage is right for you," Koss says.
Lenders don't include such financial necessities as retirement and college savings, and future home improvements when factoring how much mortgage you can afford, says Koss. He recommends that buyers in their 30s and 40s consider all the financial responsibilities they'll face as they age, and not take on a monthly payment that leaves them too little financial wiggle room.
No. 3: Jumbo loans and credit scores
Malcolm Hollensteiner, director of retail lending sales at TD Bank in McLean, Virginia, agrees with Koss that many older buyers purchase larger homes which could require a jumbo mortgage.
Hollensteiner says that lenders typically require higher credit scores to qualify for jumbo loans. At TD Bank, Hollensteiner says that the minimum average credit score to qualify for a jumbo loan is about 720.
"Every lender is different, though," he says. "And lenders will allow a lower credit score if you put down a larger down payment. But credit scores could become a bigger issue for buyers in their 30s and 40s” as they have a longer credit history which could include some late or missed payments through the years, Hollensteiner explains.
HSH.com's Down Payment Calculator
No. 4: Good schools and short commutes
All buyers should want to live in an area with strong schools; good schools help property values. Buyers in their 30s and 40s need to take a long look at the performance of area schools before buying homes, Koss says. An area with strong public schools could save you from having to send your children to costly private schools.
Additionally, these buyers are often settled into a career at one company and they must look carefully at their commute times to work, Koss says.
"School systems, commutes, they are both more important when someone is planting their roots," Koss says. "It can get complicated in our two-income world: If I work here and you work there, where is the best place in between? And does that place have a good school system? You have to plot that out."
No. 5: City vs. suburb
Rosenbaum says more and more of his Gen X clients are interested in the urban lifestyle. Since these buyers are often purchasing forever homes, they have to be especially careful when making the choice between urban or suburban living.
Rosenbaum says that city living could cut down on commute times but could increase purchase costs. The growing popularity of urban centers means much higher priced real estate when compared to the surrounding suburbs.
"There are plus and minuses with both choices," Rosenbaum says. "Suburbia is a good value today because so many people want to remain in the city. But city living is very attractive, too."
More help from HSH.com
Home price recovery index: Which metros have improved the most, least?Have home prices in your area fully recovered from the declines suffered during the Great Recession, or are they still struggling to make it back to the peak reached before the crisis?
Metro area definitionsGeographic definitions for the 50 metropolitan areas in "The salary you must earn to buy a home in 50 metros"
12 essential tax questions for homeownersKnowing the answers to these 12 critical tax questions will help homeowners keep their tax bill as low as possible.
Can these home price trends predict the next NFL champion?But is there any specific relationship between home prices, mortgage rates and success in the NFL? Of course not. However, it's fun to forecast the winner of Super Bowl LII based off certain housing market characteristics!
Should I consider my home an “asset”?The answer is "yes", or even "maybe" or "it can be", usually modified by "but not right away, if ever." When it comes to the financial aspect of homeownership, the answer is rarely simple.