Home and Hearth: 6 First-Time Home Buying Tips for Millennials
In 2019, millennials made up a whopping 38 percent of all homebuyers in the United States.
Its clear millennials are into homeownership and for good reason. Owning a home doesn’t just give you an access card into the homeowners’ club. It’s a savvy financial investment that will add to your wealth over time.
However, the home buying process isn’t as simple and straight forward as you’d think, especially for a young, inexperienced buyer like you. The good news is that’s why we have compiled this article.
Continue reading for home buying tips that will help you make a smart purchase.
- Get Your Financial Ducks in a Row
Considering that the median price of a house is $250,000, buying a house is a massive financial investment. Whether you’ll pay for it in cash or via a mortgage, there’s no doubt the purchase will be a big test on your financial muscle.
This is why it’s super important to get your financial ducks in a row before buying a house. You don’t want to fall into financial pressure once you have made the purchase. Ideally, you want to maintain your quality of life.
One of the biggest financial moves you should make before becoming a homeowner is to pay off your debt. Whether it’s a personal loan, student loan, car loan, credit card balances, or any other type of loan under your name, strive to clear it.
Especially if you want to take a mortgage, paying off other existing loans will not only improve your chances of getting approved but also ensure you won’t be committing a big amount of your income to pay off debt.
Speaking of income, you want to ensure that yours is steady enough. Losing a job if you’re employed or running into losses if you run a business will have a big impact on your home loan. You might be unable to repay the loan and your home might be foreclosed.
- Go for a House You Can Afford
Buying a home is an exciting process. There’s no feeling quite like stepping into the market and checking out various houses.
Unfortunately, the house-hunting process can lead you to a property that wasn’t even in your plans. Perhaps you set out to buy a single-family home in a suburban area but you ended up buying a beach house simply because you couldn’t resist the ocean views.
Don’t make such a mistake. Or if you have to deviate from your initial plan, at least make sure that you’re settling on a house that’s within your financial range.
Buying a house you can’t afford sets up for possible financial hardship in the future.
Keep in mind that affording a house isn’t just about being able to pay for it at the point of purchase. There’s a lot that goes into being a homeowner than splurging the cash price. There could be unforeseen expenses that run deep into your account.
Just because you qualify for a larger mortgage doesn’t necessarily mean you can afford that mortgage. Yes, you could be able to pay for it, but what if the larger monthly repayments leave you with inadequate disposable income? You could find yourself in a position where you own a home but can’t afford to pay utility bills.
Know how much house you can comfortably afford before taking the next steps.
- Know Your Credit Score
Knowing your credit is a must if you’re looking to secure a mortgage.
Different types of mortgages have varying credit requirements, but for a conventional mortgage, your credit should be no less than good.
When you know your credit before you start the process of buying a house, you’ll be able to determine whether you currently have what it takes to qualify for a mortgage.
For instance, if you’re eyeing a traditional mortgage and your credit isn’t good, you have two options. You could resolve to start building your credit, but this will take time. Another option is to go for another type of mortgage, such as an FHA loan, but this also has special eligibility requirements.
Either way, it’s important to focus on building your credit if it’s bad. Paying off your existing loans is an effective way to give your credit score a boost. Maintaining low credit card balances also goes a long way.
- Save Up for a Down Payment
Most lenders will require you to make a down payment when you’re applying for a mortgage. The minimum deposit requirement will vary from lender to lender but can be anywhere from 2 to 20 percent of the cash price of the house you want to buy.
It’s in your best interest to pay a bigger deposit. It increases your chances of getting the best terms on the mortgage.
- Get Your Mortgage Application Pre-approved
Even if your credit score is perfect, you have no guarantee that your mortgage application will be approved. A lender can reject your application for a range of reasons.
It’s vital to get your mortgage pre-approved before starting house hunting.
Although a pre-approval isn’t a guarantee of the final approval, it does show that you have a good chance. Importantly, it lets you know the amount of money the lender is willing to offer you. This will inform your decision on the cost of the house you can afford to buy.
- Make the Move
You’re ready to buy the house of your dreams!
If you’re buying in cash, go ahead and do it. But first, ensure you know all about making a cash offer on a house. If you don’t, a buyer’s agent can help you.
If you’re being mortgage financed, the process is a bit longer, but the lender will release the funds to the seller once you have an agreement. It’s also advisable to engage the services of a buyer’s agent.
Put These Home Buying Tips to Use
Buying your first home, especially as a millennial, is a big deal. You don’t want to get it wrong. Put these home buying tips to use and you’ll be on your way to securing the house you’ve always dreamed of.
Good luck and be sure to keep tabs on our blog for homeownership tips and advice.