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Home Buying Tips for Millennials

Home Buying Tips for Millennials

Homeownership is a dream we all strive for, but for millennials, making this a reality can seem far out of reach. With financial factors like student loan debt and the rising cost of rent, it can be difficult to save money towards a down payment on a home.

Today, the average millennial is looking to buy a home before 35, that’s almost a 10-year difference compared to the home buying age of their parents. The longer millennials wait to buy a home, the longer it will take them to reach financial security, even after retirement.

Nevertheless, millennials continue to find ways to work around these obstacles.Here are some helpful tips that can help you prepare for your home buying process:

Pay Off Your Student Loans and Any Other Debts

One of the major factors coming in between millennials and the home buying process is student loan debt. According to Student Loan Hero, 69% of college students took out loans in 2018, with an average debt amount of $29,800.

So, it’s safe to say the stress of student loan debt is amongst most millennials. Though it may seem impossible to some, try your best to pay off as much of your debt as you can, before adding on to your finances with the home buying process.

There are some options to consider in terms of paying off your student loan debt. Loan consolidation or student loan refinancing are two options that you could greatly benefit from. Loan consolidation is an option if you have multiple loans and would like to consolidate them into one monthly payment. You can get your monthly loan payment lowered, which would result in a longer period to repay.

If you’re looking into consolidation, weigh out the pros and cons. Though your monthly payments could be lowered, your interest rates may spike, resulting in more money added to your overall balance. Another smart option is loan refinancing. This is a great option when home buying because it could get your interest rates lowered and help you pay off your debts faster. Look into different lenders who offer student loan refinancing and compare their rates.

No matter what option you decide to investigate, make sure you have a full understanding on how they work, and figure out what option would be the smartest move for you personally. Aside from student loans, try your best to pay off any outstanding debt you have. Credit cards, car notes, you name it. Focus on getting those debts paid off so you’re in a good position to qualify for a home. Come up with a plan to take control of your money and get out of debt.

Track Your Credit Score

In order to qualify for a mortgage and get a good rate or qualify for a loan, your credit score most be in good range. The higher your credit score, the better chance you have at qualifying for a lower mortgage rate.

If yourcredit score is low, look forthings you can dothat can help get it higher. If you focus on paying off any outstanding debts, small or large, it can help you focus on what you need to do to get that credit score in order. Of course, all lenders have different qualifications when it comes to your credit score, but always try to aim as high as you can so you can qualify for the best possible options.

In order to qualify for a mortgage and get a good rate or qualify for a loan, your credit score most be in good range. The higher your credit score, the better chance you have at qualifying for a lower mortgage rate.

If yourcredit score is low, look forthings you can dothat can help get it higher. If you focus on paying off any outstanding debts, small or large, it can help you focus on what you need to do to get that credit score in order. Of course, all lenders have different qualifications when it comes to your credit score, but always try to aim as high as you can so you can qualify for the best possible options.

Save, Save, and Save Some More

An obvious, but very crucial part of the process: save your money! If you’re serious about buying a home, you need to make it your goal to save money towards a down payment. You may be thinking, how is it possible for me to save while I’m still in debt? Come up with a goal amount that is reasonable for your monthly income. It can be tricky to save money to buy a home whilst still trying to pay off your debts, but if you budget and manage your money correctly, it’s doable. Make a plan and stick to it.

Pro Tip: “Make it a habit not to touch the money once it’s in your savings account! If you think you’re the type who often dips into their savings when money is low, make a separate account for financial emergencies. When you’ve got a plan, taking money out is only going to push you further from reaching those goals you set.” – Sacha Ferrandi, Founder and Principal of Source Capital Funding and Texas Hard Money

You may have to make some changes to your expenses and cut back on a few things, but the more you’re able to save, the faster you’ll get towards home ownership. A typical down payment on a house is 20% but FHA loans are available for first time home buyers and can help qualify you for a lower down payment.

Get Preapproved

Getting preapproved for a mortgage is a smart and quick way to understand what you can afford before you start the home buying process.Lenders are going to look at your debt to income ratio to see if you’re qualified, considering you still have debt to pay off.

Educate Yourself and Get Expert Help

Now that you know all there is to know before jumping into the home buying process, start educating yourself on the next steps. It may be smart for you to connect with a trusted and experienced real estate expert to guide you through the process, especially for first time home buyers.

Many millennials may find it easy to hop online and start searching for the perfect home but having an expert by your side can help you figure out all logistics and find a home that is suitable for your lifestyle. They’ll also be a huge help when it come to negotiating numbers for offers on homes.

Pro Tip: “Many first time homebuyers make the mistake of trying to do things on their own. Hiring an agent can save you tons of headaches throughout the home buying process. There’s a lot of logistics that go into this process that will require expert help. To make the smartest decision, consider hiring a trusted agent.” - Heather Serdoz Marketing Manager of Biproxi

Start exploring the market and pay attention to market trends within the desired area you’ll be buying from. Study the market, the neighborhood and how long houses in this area have been on the market. All of these factors can help you when it comes to figuring out fair asking prices.

It’s also important that you come up with any priorities you may have for potential homes. This will help you navigate through different options to find the house you’re looking for. If you’re working with an agent, make sure you give a list of these priorities in the beginning.

Buying a home is a huge investment and major life decision. If you’re a millennial, now is the time to start thinking about investing in a home. Think of the long-term benefits you will have once you make that first home purchase.

You’ll no longer have to put your money towards rent, you’ll become a smarter spender and you’ll get a nice tax break. The process of home ownership can be scary, but when you’re equipped with the right knowledge and plan, you can turn your dream of purchasing your first home a reality.

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