The Millennial Generation grew up during the housing crash, so rightfully they are more cautious of becoming homeowners because of the foreclosure problems they’ve read about or their parents may have experienced.
Now, facing high student loan debt and a tough job market, studies show that Millennials are less likely than other generations to experience homeownership. And during the last few years, the real estate market has been especially scary for would-be homeowners. What’s a Millennial to do?
Here are a few First Home Buyer Tips for the Millennial Generation to help you pursue your dream of home ownership someday:
Learn as much as you can from a local Mortgage Broker you trust “to really understand the mortgage process; what types of mortgage programs are available: and what types of payments and upfront costs are associated with specific property types,” says Malcolm Hollensteiner, Director of Retail Lending Products & Services at TDBank.
By connecting with a lending professional beforehand, Millennials will be able to find out what it takes to qualify for a loan and maybe even get Pre-Qualified for one.
Part of the learning process also includes becoming knowledgeable about the real estate market you’d like to buy a house in. A Real Estate Agent who knows about the local markets will help you determine where you want to live, give you an idea of what properties are available in your price range, and allow you to develop a solid game plan.
Map Out Your Future.
Are you financially prepared to take on the debt of a mortgage? Do you have enough money saved up for a rainy day fund? Have you accounted for the maintenance costs of owning a home? How much of your hard earned savings are you willing to contribute toward the Down Payment on a First Home and the Closing Costs associated with the purchase? These are all very real questions that Millennials should ask themselves when dreaming about buying their First Home.
Plus, homes nowadays may not appreciative in value the same way they did during the boom years. So consider renting as an alternative if you can’t afford the costs of owning a home or are unsure of your plans five years from now.
Review Your Credit and Finances.
With many Millennials mired in high student loan debt, it’s important to take a good look at your credit and any outstanding debt you might have before you even begin thinking about buying your First Home. To determine whether you qualify for a loan, lenders will take a look at your debt-to-income (DTI) ratio. Any student loan payments, expensive car payments or credit card debt you have will affect the ratio. Try to pay down as much student debt as you can, consolidating your student loans, to improve your debt-to-income ratio.
Also, resolve any credit issues before beginning the process of buying a house. You want to put yourself in the best position possible. So if you don’t have enough credit history, for instance, find out what you need to do in order to build credit.
Use Technology to Your Advantage.
More than previous generations, Millennials have at their disposal a number of online tools that can help ease and speed up the home-searching and home buying process. From online calculators that help you determine how much you need to save in order to buy a home to real estate listing websites, the Internet can be your best friend as you navigate the real estate waters.
Even something like Google Street View can show you what a neighborhood is like and, of course, there are sites that review potential real estate agents you’re thinking of hiring. Many of these tools are available as apps as well, so take advantage of them.
New federal law says the maximum allowable DTI on a mortgage is 43% of a borrower’s gross monthly income. That includes the mortgage payment, monthly escrow for taxes and Homeowners Insurance, monthly Mortgage Insurance plus any other debt payments. “Just because you might be qualified up to a certain loan amount doesn’t mean you have to buy that much property,” says Hollensteiner.
Hollensteiner also says that Millennials are particularly good at looking at properties that are within their budget. “The millennial generation grew up during the housing crash, so rightfully they’re more trepidatious of becoming homeowners because of the foreclosure problems,” he says. “Understand that homeownership is as much an investment in the community as an investment in your own financial portfolio.”
Owning your own home has been the American Dream for decades. It’s a dream that has been sorely tested by the real estate crisis and economic developments in recent years. I have the belief that anyone that deserves to own a home should be able to do so. The Dream is still attainable for those Millenials who do their homework, establish a game plan and work hard to achieve that goal.
The article Tips for Millennials Hoping to Buy a Home originally appeared on Fool.com. and MyBankTracker.com