An article by Catherine Rampell of the Washington Post said that millennials want to own a house, but they can not afford it. But that was a few years.
According to the latest report of the National Association of Realtors, millennials make up a massive share of home buyers at thirty-eight percent. That is a composition of twenty-five percent of buyers aged 30 to 39 and thirteen percent of buyers aged 22 to 29.
This means that millennials are no longer scared of buying their first homes today, in contrast to what the study suggested a few years back. Here is how they can prepare for the biggest purchase of their life:
1. Get pre-approved for a home loan
This is the best course to take to have future homeowners ready for a home loan. This can prepare them to be knowledgeable in the real estate market. And, can help them choose which property for sale is the right one for them.
When future home buyers are aware and certain of their home preferences and purchasing capability, the seller will have an impression that they are serious about buying a home. This increases the chance of the mortgage from getting approved.
2. Boost income to save for a home deposit
Having a full-time job is great, but if they have other streams of income, it will be much quicker for them to save up for a house deposit. Not only that, having a higher income can land them a bigger loan.
If possible, make a substantial down-payment. This will not only lower the interest rate but will also help settle the mortgage much faster.
Here are some ideas to increase monthly income:
- Have a garage sale for unused and unwanted stuff.
- Start a side hustle business.
- Pick up some freelancing jobs.
- Drive for a ride-sharing company.
Saving up for a deposit will really take some time so remember to be patient on this and keep saving.
3. Settle student loans and other types of debts
According to a report, a typical millennial has $27,251 debt—mortgage excluded—making them the generation with the fastest-growing debt charge.
Given the situation, it would still be best to pay off existing debts and loans before exploring mortgage options. Having a lot of existing debts will surely affect the loan amount the mortgage lender will approve.
What you can do now is improve your credit score and store cards first. Have a clean record and increase the chance of getting a bigger loan amount.
4. Reduce the bills
While adding another stream of income is an excellent way to save up for a down-payment, reducing the expenses can also make a huge contribution.
Apartment rent, electricity, gas, internet, and cable services, are the most common monthly bills that can take up a huge chunk of your expenses. Consider reducing them. That should be able to help in saving more money. Think about the list below:
- Switch to a more affordable internet service provider.
- Find a cheaper energy provider.
- Cut non-essential subscriptions like movie subscriptions.
- Consider requesting a credit card rate reduction.
5. Improve credit score
Improving the credit score will play a big role in preparing for a mortgage loan. This will serve as a basis for the lender to assess if one will qualify for a home loan. Better improve the credit score because this reflects how responsible one can be in terms of paying debts. If you have an excellent credit score, that can speed up the process of the home loan.
Missing payments or, worse, not paying at all will hurt your credit score. For the credit card debts, it is healthy to always pay it in full instead of paying only the minimum amount monthly. Doing the latter will paint a bad image because that suggests financial issues. And that does not look appealing to mortgage lenders. So if you are planning to apply for a mortgage loan in the future, keep the credit score clear by paying the bills in full and on time.
6. Be a more patient person
Buying a home is something that should not be rushed. If you rushed in and borrowed more money than you can pay off to get the house sooner, that will do no good and will only result in more financial problems in the future.
Like any other generation, millennials buying their first homes require not only a huge amount of savings but also knowledge and patience. This will ensure that they are prepared for this long-term commitment.