Millennials: These 3 Tips Will Help You Buy Your First Home
Posted on: 26 August 2016
While it used to be common for young adults to work toward owning a home as early in their careers as possible, many of today's 20 and 30-somethings are more likely to travel, change jobs and even job fields, and move around for several years before they consider settling down. As a result, if you're a Millennial who is interested in buying a starter home and putting down roots, you may be under the impression that it's too difficult to buy a home within a few years of leaving college, simply because you don't see many others of your generation doing so. However, you can buy a home – even if you still have student debt. Take a look at some tips that will help you get started.
Pay Down Small Debt First
It's really not your school debt that will stop you from getting a home loan. As long as you're making your payments on time and you aren't missing payments, you should be fine. Put your focus on paying down smaller debts, like credit cards or car payments, before you apply a home loan preapproval.
Of course, if you don't have a lot of small debts and if you're able to pay off more of your student debt, doing so can't hurt, and it may help. But otherwise, focus on your smaller debts first. The most important thing is to avoid missing or late payments.
Don't Assume You Have To Pay 20% Down
Conventional wisdom says that you need to put 20% down to buy a home, but the truth is that some lenders will offer mortgages with a down payment of 10% or less. Should you take a lower down payment, or wait until you have enough cash for the 20% payment?
The answer really depends on your own unique financial situation, but there certainly are cases where it makes sense to pay less money up front. Paying less money down allows you to hold onto some cash for emergencies or for your regular bills, but it also means that you'll probably have a higher monthly payment. Make a budget for yourself and figure out what you can and can't afford, then make a decision. But don't automatically assume that you have to wait until you have 20% to put down.
Use a Real Estate Agent
With the large number of online tools available to today's home buyers, it's easy to think that you don't actually need a real estate agent. To a younger buyer who is used to online self-service tools and has never purchased a home before, using an agent to buy a home may seem like an outdated custom. However, the agent does a lot more than just get you access to the keys to houses you want to see.
Buying a house is a huge decision that can involve some highly confusing details, especially for first-time home buyers. Deciding on a home is also an emotional decision, and that can sometimes affect your judgment. A real estate agent is someone who knows the process inside and out and isn't personally affected by the decision, and they can be a real asset to you. It helps to have someone involved in the deal that's on your side and looking out for your best interests. The agent is that person.
And it doesn't cost you anything out-of-pocket to use a real estate agent – when you buy a house, your agent and the seller's agent split the commission. If you don't have an agent, your seller's agent would get the whole commission. So either way, that commission money is going to somebody – why not ensure that you get some good real estate guidance out of it?
It may take some time and patience to find the right loan and the right home, but you can buy a home while you're young if that's your dream.
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