Your first home as a millennial is the biggest purchase in a lifetime. This significant financial investment is both intimidating and complicated. However, with the right preparation and research, buying a home can be manageable. So how can you prepare to buy a home?
How Can Millennials Prepare to Buy a Home?
The first step of the home buying process begins with you knowing your budget. Our credit counseling advice for any financial matter is always to budget. Your budget should not only include the price of the home, but also property taxes, insurance, lawyer’s fees etc. The costs when buying a home add up sooner than you think. Therefore, planning ahead for all these expenses is crucial.
The next thing is, as millennials, you should have enough money saved when you prepare to buy a home. Knowing what you can put down initially and whether or not you are prepared to pay mortgage insurance are important decisions. Here are some more important tips for millennial homebuyers.
Pay down any outstanding debt, including credit cards, student loans or auto loans. A debt management program can help with this. Paying down existing debt can help prepare consumers for the financial responsibility you are about to incur with home ownership.
Check & Improve Credit
Keeping on top of your credit is key! You can check your credit report with all three credit reporting agencies to ensure there is no erroneous information on individual credit reports. In order to reap the benefit of obtaining a lower interest rate, you should focus on making your credit score as healthy as possible. With a score of 760 or higher, consumers can qualify for the lowest interest rates. Anything below can still qualify for a mortgage, but the interest rates will be higher.
Take a Pre-purchase Homebuyer Education Class
A homebuyer education course can save time and stress. These usually provide a thorough background in home buying advice and information. And, upon completion, you will receive a certificate that can help you qualify for special loan programs.
Know Your Budget
As millennials, you need to take a look at your budget to see if there is anything you can live without or cut back on. It is essential that you know your limits when it comes to purchasing a house. Be sure to factor in all the expenses that come with owning a home, such as property taxes, insurance, potential HOA fees, maintenance, and other costs.
The more money millennials can put down towards the mortgage loan, the more attractive they are to lenders. If you can put down more than 20 percent, you will not have to pay private mortgage insurance. A conventional loan typically offers some relief from PMI (private mortgage insurance). Once you reach 20% with a conventional loan, the lender will typically allow you to cancel the PMI. However, being able to save a hefty down payment is a great way to determine if you are indeed financially ready to become a home owner.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.