Many millennial homebuyers are entering the market for the very first time. Others are ready to move out of the starter home and into something more permanent as their family grows. No matter your situation, it’s best to have a few tips to help you buy your next home.
Buying a home for the millennial generation is quite a bit different compared to other generations. Typically, they come with a unique set of circumstances and challenges. Here are 5 tips for millennial homebuyers to help make the process easier.
Eliminate Student Loan Debt
One of the biggest obstacles for millennials is student loan debt. It can wreak havoc on your debt-to-income ratio and on your credit if you’re not careful.
Paying off student loan debt before trying to buy a home will make it much easier. Not only will you have eliminated a huge monthly payment in your budget, but you will also build good credit in the process.
Pay Off Other Debts, Too
Often, millennials come to the table with more than just student loan debt. They may have credit card debt or a car loan. While it’s not necessary to pay these off completely, getting them paid down to a lower balance can make a difference. Of course, if you can pay any debt off before buying a home it will make it easier to save for a down payment.
With credit cards, you want to make sure you’re not carrying a balance higher than 25% of your credit limit. Anything higher than 25% will actually hurt your credit instead of helping it.
Don’t Skimp on the Down Payment
The amount you put down on your home will make a huge difference. Since most millennials will be using a mortgage to buy a home, it’s necessary to bring a hefty down payment to the table. Those willing to delay home buying until they’ve saved 20% down will be able to avoid PMI or private mortgage insurance.
Not only will a larger down payment save you money on PMI, but it may also allow you to get a more favorable mortgage. Even a small decrease in your interest rate could save you tens of thousands of dollars over the course of the mortgage.
Create a clear savings plan and get to work on saving as much as you possibly can for the down payment on your next home.
Gain Pre-approval Before Shopping
Too often, new home buyers start looking at listings before they know the terms of their potential mortgage. Instead, go through the pre-approval process first and find out how much you can get approved for when it comes to a mortgage. This will help you see the reality of your situation and know what you can afford instead of shopping for a home and hoping you can afford the one you fell in love with.
Hire a Good Real Estate Agent
As a buyer, your real estate agent doesn’t cost you a dime. The seller will pay the agent’s commission and you won’t need to worry about it, in most cases.
Finding a good real estate agent makes a huge difference throughout the entire buying process. Not only will they be able to help match the right homes for sale for you, but they will also provide timely advice throughout the process. From recommending the right home inspector to helping you create a compelling offer, your real estate agent is an invaluable asset.
Use these tips to help make the home buying process much easier. A well prepared millennial homebuyer actually has a chance when it comes to competing with other buyers in today’s real estate market.