Millennials have been slow or reluctant to buy homes based on a number of factors (crippling student debt, a recession, poor wage growth and economic uncertainty), but these factors do not have to upend dreams of owning a home altogether. Yes, buying a home is a big commitment, and it is important to be prepared, patient and willing to take on a mortgage. But there are a few critical steps millennials can take to make the process work more in their favor. Owning your own home is possibly the surest way to build long-term wealth.
Pay Down Small Debt
If you’re a millennial and looking to buy, chances are you have some student loans. You won’t have to worry as much about student loans in the homebuying process as much as much as credit card debt, car payments, and any other monthly payments. If you can pay down some of your student loans, that’s great! But no matter what make sure you DO NOT miss a payment! Tackle those small, high interest debts first to get a good start on paying down debt.
Set Your Budget
Once you’ve paid off some of your smaller debt, it’s time to look at what you CAN afford, not what you THINK you can afford. It’s a good practice to aim for a monthly mortgage payment (payment, taxes, homeowner’s insurance) that will be less than 25% of your monthly income after taxes.
Save! Save! Save! As you begin entertaining the idea of buying a house, be sure to start (or add to) a robust savings plan. In the homebuying process, you will need to have money set aside for a down payment, possible closing costs, home inspection, surprise expenses and (to be safe) an emergency home fund.
In most cases, you’ll need to apply for pre-approval for a home loan. Most realtors and sellers won’t work with you if you can’t show proof of mortgage eligibility.
Find a Realtor
Good news! On the buying end, there is no out of pocket cost to have a real estate agent. The agent receives a cut of the agent commission from the purchase/sale of the property. Millennials are tech-savvy and often independent workers, so it may not seem like you need a realtor at first, but having a realtor of your own in the process can be a game-changer. You will want someone in your corner to negotiate with sellers and the bank and to explain what exactly all of the real estate market lingo meant.
Portland Maine Living can provide necessary tools and advice to navigate the buying process. PML can connect YOU to the right lender in order to facilitate the home buying process. Contact us today!