If you’ve been paying attention to the real estate trends, you may have heard the Millennials just aren’t buying homes at the same rate as their previous generations. Aside from the simple fact that it’s just not affordable for most, many site reasons like high student debt and low loan availability. Studies show that only 37% of millennials owned homes in 2015 – that’s 8% lower than Gen Xers and Baby Boomers at the same age.
Is homeownership really that unaffordable for this generation? Or are there other variables at play? For those Millennials ready to put the sold sign up and be handed the keys to their new house, we’ve compiled some tips from other Millennials homeowners.
- Know what you want – Many Millennials who are looking to purchase their first home have only lived in 2 places, at college and with their parents. It’s important to know exactly what you are looking for in a home and where you want that home to be. If you are thinking about moving to a different city without having spent some quality time there, you may want to rethink your timing. Moving several states away or even across the country only to change your mind after owning a home for 2 years may not be the best investment.
- Get your credit in shape – We’ve all made stupid credit mistakes especially when obtaining our first credit card, but if you are looking to purchase your first home, your credit needs to be in great shape especially since you probably have little credit history. Make sure all your bills are paid on time and keep your account balances below 30% of your limits – yes, the mortgage company will look at everything.
- Know what you are approved for – Getting preapproved for a mortgage is always one of the first steps in the process. You can’t begin to look for houses if you don’t know what you will be approved for. You can plug in some of your information using a handy financial calculator, but most realtors will require a preapproval or prequalification letter from your financial institution before working with you.
- Save, Save and Save some more – Yes, you’ll need to save money for your down payment, closing costs, etc. A good rule of thumb is to start saving a minimum of 6 months before you plan to start house hunting, with most Millennials saving for a year or more. Depending on your finances, if you can set aside 20% of your paycheck or take on a second job to squirrel away extra cash you should be in good shape.
- Do your homework – Besides the location, style, and how much yard you want, you should also make sure the homes you are looking at meet your other needs. When buying your first home it’s probably not going to check off all the boxes you have, but it should check off the most important ones. Bringing a friend or family member with you is often helpful as they see things you don’t, and it’s easy to miss things if you just do one visit. It’s OK to ask to see the house 2 or even 3 times, and you should drive by the home on different days and times of day to see the traffic, the neighbors, etc.
- Don’t go over budget –If you set a budget, stick to it. No one wants to get in over their head and not be able to afford their mortgage, especially when its your first home. You may fall in love with a home that’s outside your budget, but it won’t do you any good when you can’t pay the monthly payment. Only look at homes that fall within your range to avoid disappointment.
Buying your first home is scary and exciting. Buying your first home in your 20’s is even more so because of the stigma that homeownership isn’t possible for Millennials because of student debt and less lending options. Millennials may be waiting until later in life to get married and have kids, but that doesn’t mean that homeownership isn’t still an option. At Litchfield Bancorp, we love working with Millennials. For more information on our lending options or to talk to someone about pre-approval, you can visit our website or call or visit any of our 5 convenient locations.
Vice President, Senior Mortgage Lender
NMLS MLO ID: 532621