Tips For Millennial Home Buyers
For any millennial home buyers looking to purchase their first home, searching for their dream home is both an exciting and daunting process. With so many factors to consider, it’s easy to get overwhelmed by the entire concept of home ownership. However, that isn’t stopping millennials from making this big step. If you happen to be a millennial home buyer, take a look at this first-time home buying guide.
Explore different mortgage options
Finding the optimal mortgage solution should be one of the top priorities for millenial home buyers. Everyone’s financial situation is different and there are so many different loan programs that can accommodate them. Therefore, it is best to find a lender who offers programs that suit your current financial situation as a millennial home buyer.
The next step would be to get pre-qualified for financing. However, checking your credit scores and doing what you can to improve them will help with your down payment requirement and your interest rate.
Your credit rating, financial situation, and credit history are factors that will be taken into account when determining your mortgage eligibility, so be sure to do anything you can to resolve any disputes and pay off any debts to help raise your credit score. This will help you determine your budget and give you an idea of the price range of homes you should be looking at.
Read our article on how to improve your credit score.
Be sure to manage your current debts first
In order to improve your credit score and increase your chances of getting accepted for a competitive mortgage rate, you’ll need to find a way to improve your financial situation. When it comes to millennial home buyers, outstanding debts are one of the biggest obstacles that get in the way of financing their dream home. Due to their student loan debts, many millennial buyers delay their home purchase, taking their time to optimize their debt and improve their debt-to-income (DTI) ratio.
Although you may have a significant amount of student loan debt waiting to be paid off, that does not mean that home ownership is something that is out of your reach. By lowering your outstanding debts, you’ll lower your monthly expenses, get your finances into shape, and you’ll be able to secure better mortgage rates.
When you are deciding which debts to pay off, our recommendation is to select the ones that have the highest monthly payment and not necessarily the one that has the highest outstanding balance. When qualifying for a mortgage, it is the monthly payments that are used for qualification purposes. The higher the monthly debt, the less you can qualify for when it comes to applying for a mortgage. The other important factor is to hold back the funds you need for your down payment, closing costs, and reserves.
It is critical to have a discussion with a lender well before you begin your home search. He or she can help guide you on what the best method is when it comes to paying down your current debt. Click to speak with a lender to have a free consultation.
Consider the other costs of home ownership
Other than the mortgage, homeowners insurance and property taxes. If you put less than 20% down, you may also have PMI (Private Mortgage Insurance) as part of your monthly payment.
Purchasing a new home also comes with utility bills, as well as maintenance and repairs that the landlord used to cover. Depending on the condition of the house, you may need to tackle some repairs before moving in.
The wiring and electrical work will need to be checked to make sure they’re safe and up to code. If electrical problems are discovered, don’t tackle the electrical work yourself. Doing so is potentially dangerous, and in some countries it’s considered illegal. Aluminum wiring can be a concern with older homes too. That is why many homeowners contact an experienced electrician to inspect their wiring and fix any issues that may exist. Doing so will reduce the risk of electrical fires and help avoid any unwanted surprises later on.
Take your goals and priorities into account
When making such a big purchase, you need to consider all the different ways this decision will impact your short term and long term goals. Home ownership is a long-term commitment, and because of this, it is essential that you think this through and make a calculated decision.
It is hard to predict the path your life will take in terms of career or family, but if you want to make the right decision, you need to have a vision of what you want your life to look like in the next five, ten or fifteen years.
If you’re planning on settling down and starting a family, some of the factors you’ll need to consider are proximity to schools and work and the safety of the neighborhood. However, the most important factor to consider is whether the neighborhood you’re moving in ties in with your personal core values and whether the area has that X factor you’re looking for. Real estate professionals will also tell you that your home purchase is an investment so adding that into the equation is a factor as well.
What Percentage of Millennials Own a Home?
According to inc.com, millennials want to purchase a home but most do not think they will have the ability financially for at least a decade. Less than 5% of millennial home buyers can actually afford a home right now. The common issue holding them back seems to be a significant amount of student debt.
What do Millennials Want in a Home?
You would think that millennials want to live in a trendy studio apartment right next to a Starbucks in a major city. However, it seems that more than half of them would prefer to live in the suburbs and 75% of millenials actually want to live in a single family home. They also prefer an open floor plan and to have at least 3-4 bedrooms.
Best Real Estate Purchase for Millennial Home Buyers
When you factor in the financial hardship that millennials face, combined with the rising cost of real estate, multi family residences make the most sense today. Young home buyers often dream of the perfect single family home in a great neighborhood. However, your first home purchase should be looked at as your first step, just like your first job. It is part of an evolution and a building block.
Buying a 2-4 unit home is the best option today for young home buyers. The other rented units will greatly offset the cost of the mortgage. As a result, your monthly out of pocket would be significantly less. This will also enable you to build more wealth and save more money for your next home purchase at some point in the future. You can even get an FHA loan with just 3.5% down on a multi family home.
Millennial home buyers can buy their dream home today despite some financial hardships. Familiarizing yourself with the home buying process is an essential step towards making one of the biggest purchases of your life. Following some of the steps outlined above can help you to becoming a homeowner much sooner than you thought.
25 First Time Home Buyer Tips – This list of first time home buyer tips was put together by various real estate professionals in the industry.
Stop Renting and Buy a House – This article will help you to know when it is time to stop renting and to buy a home instead.
Should I Buy a Home Before Having a Baby? – See what your options are if you are deciding whether to buy a home first or start a family.