Millennials and Home Buying
For people in their 20s and early 30s, renting is the norm and home ownership is the exception. Many young people are just out of college with student loans and entry-level earnings that can make it hard to save for a house while renting at the same time. Plenty of millennials feel as if they’ll never see the end of their student loan debt, much less save enough money to make a down payment on their first home. The average student loan debt for the class of 2015 climbed to $35,000.
Despite the challenges, many millennial buyers have managed to make the down payments and secure mortgages. Realtor.com reports that 30% of all existing homebuyers at the end of 2015 were 25 to 34 years old, and Bloomberg Business reports that 37% of mortgage borrowers were millennials.
But all is not necessarily lost for young people, you may be surprised to know that there are a few strategies that anyone can use to make obtaining a home more affordable, especially millennial first-time homebuyers.
Get Your Debt in Check
Take a look at your monthly payments and make sure you aren’t falling behind on them. If you can manage to pay off smaller debts that is even better. Your current and past debts, as well as your repayment history, are taken into account when you apply for a home loan. Being able to show that you can stay on top of your payments or are not under a large volume of debt will help improve lenders’ confidence in you and you’ll be able to secure a lower interest rate as a result.
Everyone, not just millennials, should start saving when they are considering buying a new home. There are down payments, closing costs, home inspections, home improvements, and probably even unexpected expenses you’ll want to be prepared for. Having a pool of money to draw from is really important. Try setting aside money automatically every time you receive a paycheck — no matter what. You will be shocked how quickly your funds will grow.
Before you start shopping, it's important to get an idea of how much a lender will actually be willing to give you to purchase your first home. Pre-approval gives you a concrete price range to work within when you go house hunting. Aiming for homes near the middle of your pre-approval range helps minimize risk to yourself and accounts for how the actual loan amount can end up differing from the pre-approved quote.
When you are ready to start actually looking at homes take your time and don’t get overwhelmed. It’s important to get a grasp on comparable homes in the area. One way is to enlist the assistance of a licensed real estate agent. Ask questions and respond quickly to your home buying team. You also need to know and understand which neighborhood is best for you, which can help you to gauge your home’s resale value. By knowing the value of surrounding properties, you will know if the nicest home you want out-prices the other homes.
Get a Home Inspection
Even if the home you plan to purchase appears to be flawless, there's no substitute for having a trained professional inspect the property for the quality, safety, and overall condition of your potential new home. When looking at a home inspection report, pay particular attention to anything involving the roof, plumbing, foundation, and heating/cooling systems. Problems in these areas can incur significant costs shortly after moving in and could easily cripple your wallet. You don't want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs. If the home inspection reveals serious defects that the seller did not disclose, you'll generally be able to rescind your offer and get your deposit back. Negotiating to have the seller make the repairs or discount the selling price are other options.
Home ownership is a big milestone step in anyone's life. Hopefully with a better understanding of the steps along the way, you will feel more confident navigating the process. Robins Financial Mortgage Loans offer quick closings and competitive rates. Buying a home is a big investment of both time and money. You can use tools like mortgage calculators to help make a wise home purchase decision or take a look at our Mortgage video series. You can apply for a mortgage loan online or set up your appointment to speak with one of our Mortgage Loan Officers. The mortgage team at Robins Financial Credit Union is ready to help you on your way to your dream house!