As the home-buying process evolves, the rates are skyrocketing. Millennials are entering the
housing market later in life and facing many difficult decisions. Reaching a level of financial
stability is more challenging than ever, making the home-buying process much more
challenging. Here are some tips for millennials to use as they navigate this process and find a
home they can love and afford.
Pay Off Your Debt
Student loans are a huge factor in most millennials’ debt and decision-making processes when
purchasing a home. Lenders use a debt-to-income ratio when deciding how much you qualify
What you owe on your student loans significantly affects your debt-to-income ratio and your
eligibility to qualify for a substantial loan. Student loans also affect your credit score, limiting
your ability to find a lender. Begin paying off your student loans by paying more than your
minimum monthly payment.
Paying on time can increase your credit score and help you get approved for a mortgage. Pay
any outstanding debts and work on improving your credit score to get the best offer for your first
Save Up Funds
There are many benefits of owning a home, like tax breaks and the freedom to decorate, design
and have as many pets as possible. However, owning a home comes with many costs and
You’ll want to ensure that you have enough money saved for a down payment, closing costs
and unforeseen expenses once you purchase the home. It can take up to 14 years to save
enough for a down payment on a median-priced home.
A significant down payment can decrease your interest rate on your home and pay off your
home faster. If you can save a 20% down payment on the house, you can bypass private
mortgage insurance (PMI). If you’re struggling to save money, consider getting a co-signer for
your loan to help you get approved for more funds.
Trust Your Lender
Find a lender and loan adviser you can trust. Real estate agents work off commission, so
they’re out to make a sale. To avoid being taken advantage of in the real estate market, find
someone you can trust to tell you the truth about your options. It can be challenging to trust
lenders when they benefit from selling you something.
So, ensure that you do your research, read reviews and trust your instincts regarding your
lender. A lender with your best interests in mind will ensure that you understand every aspect of
the home-buying process and what options are available to you. You can also compare rates
from multiple lenders to ensure you get the best mortgage deal.
Stay On Budget
Shop within your means. If you don’t need the extra space, don’t buy a home out of your price
range. Avoid purchasing a home simply because it’s available and you can afford it. You want to
ensure you have enough funds to remain financially secure once you’ve purchased the home.
Utilities are expensive and so are renovations if you plan to make home improvements.
You can create a budget using the 50/30/20 rule, where you allocate funds based on
percentages of your income. With this rule, you spend 50% of your income on needs like
groceries, rent and utilities, 30% on wants like eating out or shopping and 20% on savings.
You’ll be surprised how fast that money can add up when you stick with it and consistently
contribute 20% of your income to your savings account. You can make a spreadsheet to help
you keep track of your money or write it down on paper–whatever works for you.
Saving money can be challenging, especially with inflation. Everything is getting more
expensive, and homes are no exception. Be patient with yourself and set goals so you can work
toward your savings at your own pace.
Learn about the market and hire a real estate agent. Real estate agents can help you find
homes within your budget that fit your needs. Real estate agents guide you through the process
and handle the legal documents and aspects of the home-buying process. Keep an eye out for
homes you want and how much they sell for in your chosen area.
Avoid the mindset that you should buy something just because it’s on sale. Avoid big purchases
on your credit cards for up to three months before applying for a loan. You’ll want to be pre-
approved for a loan, so you know your budget when searching for a home. Lenders can pull
your credit anytime until the home purchase is complete.
Tips for Millennial Home Buyers
Buying a home doesn’t have to be a difficult process. With enough planning and dedication, you
can achieve a mortgage that suits your needs. Utilize these tips to cut through the red tape and
prepare to purchase a home you love.