Being a millennial is hard. You’ve got bills to pay on top of your student debts. You also want to get the most value out of your hard-earn cash. This is why most millennials spend more on experiences. But sooner or later, you will have to make investments that can offer you stability. One of which is a house you can call your home.
One day, you will want to retire from renting and start living in your own home. You may have no plans in buying a house soon, but the subject will surely nag you after a few years. Before you even start looking for a home to buy, you must prepare yourself for a future home purchase. For a better home-buying experience, you can consider the following tips.
Boost Your Credit Score
According to reports, up to 97% of Generation Y buy with a home loan. One of the requirements to get approved for mortgage is a good credit score. But just because you already managed to build a good credit score does not mean you can already be confident. If you want to snag a better mortgage, then it is time you start improving your score more.
Most millennials have an average score of 668. If you want to secure a home purchase, opt for at least 751. Aside from paying off your debt on time, it would be best not to open other lines of credit. Make sure to check and dispute any inaccuracies in your credit report. In time, you will start to see an improvement with your credit score but only if you stick to good credit habits.
Start Paying off Debts While Saving for a Down Payment
One hot topic most millennial home buyers have these days is whether to prioritize a home purchase or their student loan payment. When you pay your student loan first, you get to save money from the costly interest rates. This helps boost your credit score and increases your chances of mortgage approval. Prioritizing homeownership, on the other hand, offers stability and can be a good idea if renting in your area is becoming increasingly unaffordable. You can use your home as a source of income by renting a room out and enjoy tax breaks for owning a house.
One option worth considering is to continue paying off student debt while you save for a down payment. Remember that doing both, buying a home while paying your student loan is never a good decision to make unless you acquired an instant wealth. If you can find more than a single source of income, you will have more funds to save for your future home without taking your student loans for granted. This way, you get to reduce your homeownership costs and you will have one less debt to worry about once you start paying for your own home.
Start Your Research
Buying a house is never an easy process. You will have to think hard where you want your home to be located, what your non-negotiables are, and what your future plans will be. You will then need to do your research like the usual price range of houses in your desired areas, the amount of space you need in your home, etc. It also pays to check just how much of a down payment you will need so you can get approved by a lender.
Take note that real estate marketing trends continue to evolve each year. Keep an eye on the market even if you have no intention to buy a house just yet. Familiarize yourself with the basics of home buying so you will know what to expect in the future.
Ask recommendations from people you know who managed to buy a house with fewer hassles. Ask about the challenges they encountered when looking for houses, when applying for a mortgage, and in paying for homeownership costs. It is also a good idea to do a bit of research and check the common regrets of home buyers especially millennials like you. This way, you don’t end up buying a house too small, in the wrong neighborhood, or not knowing all the costs and fees every homeowner has to worry about.
Just because you have no plans to buy a house in the next few years does not necessarily mean you can go ahead and forgo your home buying preparations. Remember that the more prepared you are, the better your home buying experience will be. You can enjoy bigger savings, save yourself from future headaches, and learn what to expect once you start looking for your home.