Millennials, otherwise known as people in the age range of 21 to 37 and according to Aperion Care, learned that 85% expect to own a home at some point in their life after surveying 2000 millennials.
That is great news considering home ownership is a great way to invest your funds and since most people are required to pay to have a place to stay anyway, home ownership is a great step towards investing your money in a place you would otherwise still be paying for but not going towards anything (i.e. rising apartment monthly rent). With record low interest rates and and property prices, millennials today are feeling more empowered to invest in a property rather than rent.
If you are a millennial and want to embark on your first step in homeownership but want to do it effectively, follow these 4 essential tips to get started!
Do the Math
If you don’t know what your cashflow looks like, what’s going in, what’s going out, it will be close to impossible to devise an effective plan to achieve your homeownership goals. You’ll want to first make sure you’re in a good position to afford a home and if you’re not, make an actionable plan to ensure you will be in the future.
Additionally, you’ll want to know what your credit score is because this will play a role in how low or high your monthly mortgage payments will be. Even if you find out your current credit score isn’t great, take important steps in improving your credit score before house hunting.
Pay Off Debt, then save for the down payment
According to the National Association of Realtors, student loan debt continues to be one of the most common financial obstacles in millennial homeownership next to credit card debt and car loans. These types of debt delay saving for a down payment. You’ll want to make sure you are debt-free or decrease the amount of debt you owe first by getting on a budget, doing the debt snowball method to pay your debt down which, in turn, will add more funds to either your emergency funds and/or down payment.
Once you feel you are in a more comfortable position with your debt, start allocating the money that would’ve been spent on paying off student loans and credit card debt towards your down payment. Technically, you don’t need a whole ton of money down and is a personal preference. However, the larger the down payment, the smaller the mortgage and the less you’ll pay in interest. Generally speaking, saving up anywhere from 20% to 35% of the price of the home is recommended to lower your overall mortgage together while eliminating mortgage insurance (PMI), a safety net for your bank in case you fail to make your mortgage payments.
Build an emergency fund cushion
If you’re used to renting and having a super around to fix any maintenance issues such as the AC unit, broken appliances or a leaky roof, you’ll want to financially prepare yourself with any maintenance issues as a homeowner. Prepare to either do it yourself or to spend money on a trusted handy person to address maintenance issues in your future home. It’s important to build an emergency fund, ideally three to six month’s worth of your day-to-day living expenses put away for any unforeseen situations that may arise.
Prove Yourself and Stand Out in a Competitive Market
The best way to do this is to get pre-qualified or pre-approved for a mortgage. You may be wondering, how does a pre-approval make me stand out in a competitive market? Getting a pre-approval tells the seller exactly how much you are able to borrow for a mortgage and shows how serious you are about buying a home. This alone, can make all the difference between winning or losing a bid on your future home.
Even though it may take some to get your hands on a pre-approval letter, since the process involves providing various types of financial documents to your loan officer, a pre-approval letter sends a very powerful message to the seller to take you seriously and increase your chances at winning a bid on your first home!
Once you complete steps 1 through 4, you are now ready to start looking for the right first home. Be sure to be patient as shopping for your first home can be a draining process, but it doesn’t always have to be if you have the right team in place. Do your research and find an experienced realtor and loan officer that you are comfortable with and trust as well as fully understand your homeownership goals.
If you’re looking for a home in any of the following cities in Utah: Eagle Mountain, Cache Valley, West Haven, Highland, Grantsville, Smithfield, Herriman, or Hyde Park, check out our available homes HERE or give us a call at (801) 383-1911 to find the best new home for you and your family.
Looking to get pre-qualified or pre-approved for a mortgage first? We suggest you use our featured lenders which can be found HERE. Why? You will be choosing a team that has years of experience and hundreds of loans behind them. We have 1000% confidence in our featured lenders’ ability to close your loan while providing you insight, support and advisement in your best interest.