Home Buying Tips Every Millennial Should Know
Here are a few home buying tips which can help you buy a house. Many millennials have been led to believe that buying a home is out of reach, especially for most of them who are already swimming in student loan debt. You may want to buy a home to gain an asset, upgrade from an apartment, or have more space for your furry friend to play, but the idea seems like a distant dream. Regardless of your reason for wanting to buy, becoming a homeowner is more attainable than you might think and is one of the best financial decisions you as a millennial can make. Not knowing where to start can make the process feel overwhelming but with a little research and some helpful tips, you’ll be prepared to take the next step in life, becoming a homeowner.
Building your Savings & Home Buying Tips
It may seem overwhelming to try to pay your regular bills and student loans, along with any other debt or expenses you may be faced with each month, but putting aside a little money at a time is easier than you think. Many banks offer automatic withdrawals to instantly put aside a small portion of your paycheck into savings so you’re not tempted to spend it. More often than not, you won’t even notice the stored away funds and you’ll have saved up a down payment for your new home before you know it.
When you’re considering becoming a homeowner, expect to put down 20% of the home’s price. Anything lower than that amount will be subjected to private mortgage insurance (PMI), which will create an added expense for you since lenders require it in the event you are unable to pay your mortgage loan. In addition to saving up 20% for a down payment, you’ll also want to set aside enough funds for closing costs (anywhere from 2%-5% of the home’s price), inspection fees, immediate repairs, moving costs, and more. The more you plan for all the potential expenses, the better off you’ll be when you’re ready to buy.
Don’t be Afraid to Ask your Agent Questions
Buying a home can be confusing, but luckily there are people who can field your questions — real estate agents. It’s common to be compelled to buy a home without an agent to save money, and that’s fair, but if the process seems daunting and foreign, it’s best to team up with a knowledgeable agent who can guide you through the process. As your realtor, they’re there to help you find your dream home and ensure you’re prepared to prevent any hiccups, so be sure to ask any and all questions you may have. They’re happy to help and you’ll be glad you did.
Plan for Unexpected Home Owner Expenses
More often than not, homeowners assume that if their current monthly rent is on par with a potential mortgage payment, then they’ll be set for success. It’s important to know that your monthly mortgage won’t be your only monthly house payment. It’s helpful to use a loan calculator to know what to expect in monthly mortgage payments but be prepared for property taxes, home insurance, and if you live in a gated community or condo, HOA fees. A good rule of thumb is your entire monthly housing payment (mortgage, property taxes, insurance, potential HOA fees) should not exceed 30% of your monthly income after taxes.
In addition one of the best home buying tips is to be prepared to buy a home, many millennials don’t plan for the true cost of owning a home. Repairs, upkeep, even the cost of furnishing a home is more expensive than furnishing a presumably smaller apartment. HGTV says that a home’s annual maintenance fees are around 1%-3% of the purchase price so be sure to factor those costs into your monthly budget.
Choose a Home You’ll Want to Live in for Years to Come
Due to having to pay closing costs each time you buy a home, it’s important to buy a home you can see yourself living in for at least five years. It may seem fine at first to buy a small condo for two years and then move out to the suburbs when you have kids, but each time you move, you’re spending thousands of dollars in closing costs that you won’t get back. Some questions to consider that will help you determine whether this dwelling is a good fit as a five-year home are: Does the home have enough bathrooms/bedrooms/space for future kids? Do you like the area you live in or was it the only neighborhood you could afford? Would your job take you somewhere far away in the near future? Asking yourself as many questions about any potential changes to your life situation in the future will help you find the right home.
Home Loan Preapproval is Key
Before you even make an offer, get preapproved for a home loan. A preapproval loan means that a lender assessed your current financial situation and credit history and determined a figure that you can afford to pay. This pre-approval will put the seller’s mind at ease because it means the lender has decided that you have the finances to cover the down payment and the mortgage. You can get preapproved online or over the phone and it only takes a couple of days for a response. Keep in mind you should apply to several lenders to make sure you are getting the best mortgage rate available and consider looking outside your home bank, as many large banks have more restrictions on loans.
Most millennials are first time home buyers, and fortunately, there are many governments and private programs that cater to first time home buyers to make homebuying more affordable. For example, some programs will combine the closing costs with the monthly loan payment. Once you get the preapproval process squared away, you’ll be ahead of the curve and start your home hunt.
Hand-Written Letters Go a Long Way
In competitive housing markets, many people are putting offers on homes. Even after you make an offer, the seller may get backup offers. If you feel the situation is competitive, it doesn’t hurt to appeal to the seller’s sensitive side with a lovely handwritten note explaining what this home would mean to you and your family. This may make all the difference in the current owner choosing your slightly lower offer over a higher one because of the sentiment; they’ll feel better knowing the home that brought them so many good memories with be in good hands with your family. If you follow with above home buying tips you should be on a good way to get a house soon!