Bank of America recently heralded an impending “Millennial baby boom,” based on data showing a large percentage of people who plan to start families in the next year and an uptick in purchases of pregnancy tests.
If you’re hoping to be part of this Millennial baby boom, you’ve no doubt figured out that there’s a lot to think about before you welcome your new arrival — not the least of which is whether your home is ready for a baby.
Whether you already own a house or you’re a first-time homebuyer, here are a few things to consider as you expand your family.
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Buying a home is a big decision. It’s important to look at it in the context of your full financial situation.
“The first thing I recommend is to have a discussion with a financial planner. They have a 360-degree view of your finances and what is needed for home expenses, child care, etc.,” said Jarred Alexandrov, a loan officer in Boston with Fairway Independent Mortgage Corporation (Fairway owns Home.com). “You need to figure out what is the priority, how to save, and how your home purchase fits into your life plan.”
A financial advisor can also help you determine how much you have available for a down payment, or to use toward home renovations, as well as how large a house payment will be comfortable based on your income and other goals.
Before you meet with your advisor, however, there are lifestyle factors to consider. How you think about your home will depend on your circumstances, so we’ve broken down a few different scenarios and what might influence your decision in each.
Maybe you bought your current home several years ago, when you were single or it was just you and your spouse. Now that you’re planning to start a family, you might wonder whether you have enough space for your little one.
Assess your current situation. How many bedrooms do you have? And what are you using them for right now? If you have a two-bedroom home, and one of those rooms serves as your home office, think about what will happen when the baby arrives.
Can you move your office to another area, such as a corner of the living room or the basement? Is the living room big enough to accommodate your office, relaxation space, and the baby’s toys and necessities?
Consider, too, your routine in the home and how that will change when the baby arrives. A compact space may work for you, or you and your spouse, but what will that look like when you add in a high chair, crib, changing table, playpen, and other baby items?
Run the same exercise if you already have children. Do you have a yard for the kids to play in? An indoor play area that can comfortably hold multiple children and their many books and toys?
“When thinking of growing a family, the biggest question usually is about space, and if you are already struggling to find storage now before you have children, then it might be an indication that getting a more spacious home is the way to go,” said Nicky Taveras, owner of DNT Home Buyers in Woodbridge, N.J.
You don’t need to be in your forever home right now. There’s nothing wrong with moving when the kids are growing up. But looking a few years down the road can help you decide whether to buy a new home now, or whether you’ll need to do so within the next couple years.
“You might compare how many available bedrooms (and space) you have against your plans on how many kids you plan to have to decide on whether staying or relocating is best for your family,” said Anthony Martin, CEO and founder of Choice Mutual insurance company. “If you plan to have four kids, then you might decide to sell your first home. You’ll be taking advantage of the real estate demand and get a high profit from it.”*
Paul Sundin, a certified public account (CPA) and tax strategist at Estate CPA, echoed Martin’s advice about thinking about how a home might suit your needs a few years from now.
“Remember that you’re buying a home not just for an infant — that child will grow up and become a teenager, and you may have other children later on,” Sundin said. “So you need to consider if the house can accommodate two or three young adults, plus you and your partner, if [you have] one.”
Sundin added that it’s important to think about whether the surrounding community will suit your family as well.
“It’s not just the house itself that you should take into account. There’s also the town itself. Is the property close to establishments that your family is going to need, such as schools and parks? Are the streets child-friendly?” Sundin said. “You need to envision what your family life would be like five to 10 years from now when deciding if the home is right for you.”
Hosting visitors is one thing before kids, but it can become more complicated — and cramped — after the baby arrives. If you anticipate having frequent out-of-town guests to visit with the kids, or help with childcare, ask yourself where they’ll stay, advised Joe Pessolano, a branch sales manager with Fairway in Garner, N.C.
“If you plan on converting a guest bedroom into a child’s room you must consider the displacement of family and friends that come to visit,” Pessolano said.
Having guests spend a night or two on the couch may not be a big deal, but weeks or even months can be tough on you and your guests. It’s a good idea to envision what family dynamics and childcare roles will look like, and whether your house is equipped for them.
Here’s something to consider if you’re trying to decide whether to buy now or a few years from now. Interest rates are still low, but they’ll likely climb throughout 2022. The lower rates are, the more home you’ll be able to afford, since your mortgage rate affects your debt-to-income ratio (DTI), and therefore how much you can borrow.
Additionally, as inflation drives up interest rates and home prices, locking in a low fixed-rate mortgage now can help insulate you from higher costs a little ways down the road.
Buying a house before having a child can also be easier logistically, according to Pessolano.
Once you have a child it may be more difficult to stage your house to sell and ‘declutter,’” he said. “If you need to buy a bigger house, the best strategy is to do so before having a child.”
If you’ve been renting for a while but want to buy a home, taking that step before having a baby can be a great move. It’s harder to pack and haul boxes, not to mention unpack and set up a house, with an infant or a toddler in tow.
Plus, homeownership is a core element in creating generational wealth. Buying a home when your child is young can give them a strong financial foundation as your home’s equity grows.
In addition to the space considerations mentioned above, the biggest question when it comes to buying a house is whether you can afford it.
Generally speaking, it’s often cheaper to own a home than to rent. That may sound counterintuitive because buying a home is a major purchase — possibly the biggest you’ll ever make.
But your monthly mortgage payments can be lower than what you pay in rent. And if you get a fixed-rate mortgage, your payments will be stable, unlike rent, which can increase every year.
Not sure whether it’s time to buy? Check out our rent vs buy calculator, which lets you run the numbers for both options.
One of the big hurdles to homebuying for many people is saving up for a down payment. You may need less money upfront than you think, though. There are a number of no and low down payment mortgage options.
Depending where you plan to buy, you may also qualify for down payment assistance funds.
Additionally, most loans for a primary residence (meaning the home you will live in most of the year) allow you to use gift money from relatives, friends, or an employer program toward your down payment and closing costs.
The best way to figure out whether you can afford to buy a home is to get preapproved**. A preapproval tells you how much you can likely borrow, so you can set a realistic homebuying budget. Real estate agents and sellers often require preapproval letters before they will show you properties, so it’s a good idea to get preapproved before you even start looking at homes.
However, it’s also worth deciding how much you want to spend each month on housing expenses. When you get preapproved, your mortgage lender will estimate the maximum amount you’re qualified to borrow. But you don’t need to take that full amount.
Use a home affordability calculator to see what your monthly mortgage payment — including principal, interest, taxes, and insurance — would look like based on your finances. Seeing that number can help you figure out what amount would be comfortable for you, especially if you’re saving for a new baby as well.
If you decide to buy, know that there’s no time like the present. Not only will you be taking advantage of the low rate environment, you might also have less competition for homes.
“You can use winter to your advantage since there’s usually less competition, making it an excellent time to buy a house at a lower cost than in summer,” Martin said.
Scenario #3: You own your home, and you’d like to stay in it. But you’re not sure it’s ready for a baby.
Making space for a baby doesn’t necessarily mean you have to move. You may be able to renovate your existing home to comfortably expand your family with enough space for everyone.
Sometimes that begins with seeing your home through fresh eyes.
“If you haven’t done a deep, detailed spring cleaning, then now is the time,” Taveras said. “Hiring the services of a professional organizer might also help free up some space and make the home feel a little bigger, even if it is just for the parents to be. Freeing up the space you have right now will be a good place to start.”
Once you’ve reassessed your home, you might decide it’s right for your family after all — with some modifications.
“You may want to consider removing the walls that separate the living room, dining room, and kitchen,” said Phillip Ash, founder of Pro Paint Corner. “The open floor plan frees up space and opens up views in these primary living areas. It’s also useful if you have small children, so you can keep an eye on them while they play in the living room and you cook in the kitchen.”
If you own the home and have built up significant equity, you may be able to use a home equity loan, home equity line of credit (HELOC), or a cash-out refinance to pay for pre-baby additions and renovations.
But if putting an addition onto the house or taking out existing walls aren’t options, adding shelving is a great way to get items off the ground.
“Install some floating shelves or wall storage so you can free up the floor area,” Ash said. “When you have more floor space, it’s easier to move around the house, and it will feel a bit larger than it actually is.”
You can even do this in kids’ rooms, adding shelves for books, stuffed animals, and other toys. Hanging nets or hammocks for toys is another inexpensive way to create more space and keep clutter off the floor.
Martin also suggested looking for alternatives outside the home to solve some of your space issues. For instance, he suggested turning a home office into a nursery and looking for a shared office option in your town.
“With companies developing coworking spaces, it can be a convenient time for those who work from home, since you can use those spaces to work and use extra space at home to grow your family,” he said. “It can save you money buying a new house.”
Coworking spaces often have different membership tiers, from a guaranteed seat in a common work area up to private offices and business suites. You might even ask your employer whether they will reimburse you for the monthly fees.
Whether you buy a new house, modify the one you have, or continue renting, what matters is having a space that’s safe and comfortable for you and your family. Don’t rush to buy a home that’s not quite right just because a new child is on the way. Buying before you’re ready can lead to homebuyers’ remorse, not to mention emotional and financial stress — none of which you need when you’re welcoming a baby into the world.
But if you are ready to buy, and you want to settle in a new home before your baby arrives, get preapproved with a mortgage lender as soon as possible. Preapproval is the first step toward finding the perfect new house to make memories with your family.
*Fairway does not guarantee a mortgage loan will result in equity gains or tax advantages
*Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.