Millennials are considered anyone born between 1981 and 1996. This group has faced countless experiences with high rates of unemployment and low wages. Most Millennials have some amount of school debt and a potentially questionable credit history, causing their process of purchasing their first home difficult, but here are a few tips on how Millennials can be prepared to purchase their first home.
As a first-time home mortgage, a lot of paperwork is required. A typical mortgage process requires tons of documents proving you are who you say you are. A mortgage broker may assist you with the process of information gathering, but some of the paperwork commonly needed includes current month’s pay stubs, employment contract, and driver’s license. In addition, be prepared for a credit check and to receive a “gift letter” from whoever’s helping you confirm the authenticity of the cash gift.
Additionally, saving for your down payment and other expenses is a crucial step in being prepared to purchase your first home. A down payment isn’t always required, but there are programs that allow you to purchase a home with no money down. Make sure to discuss your savings, gift options, and any other concerns you have with your loan officer to receive the right mortgage for you. Asking questions, such as whether you have enough money to maintain the property they’ve helped you purchase can be helpful. Creating a financial planning checklist to prioritize expenses will help in the long run.
Another key tip to help Millennials purchasing their first home would be to not let debt get you down. Many Millennials most likely have student loan debt, which can be a real stumbling block toward getting approved for a first home mortgage loan. Purchasing a first home can be challenging, especially when factoring in monthly student loan payments on top of saving. Understanding a debt-to-income ratio can help with this difficult situation. A debt-to-income ratio is the amount of debt you have compared to the amount of money you make. Primarily, you should aim for your debt-to-income ratio being below 36 percent, but the lower it is, the better your chances are of getting the loan you looked for.
Furthermore, getting pre-approved for a mortgage is a step closer to becoming a first-time home buyer. A pre-approval analyzes your creditworthiness, which tells you how much you can borrow from your lender. Once you have been pre-approved for a mortgage loan, begin hunting for homes within your price range. A real estate agent and sites like Zillow, Trulia, and Redfin can help your process. Making a list of your basic home requirements, such as how many bedrooms and bathrooms you need or the school district you’d like to move into, can help you narrow your search. Most importantly, the main idea should be to stick to your budget. Upgrading your house is much better than purchasing a house that you can’t realistically afford.
The home buying process can be tedious, but it should be one of the most exciting moments in your life. Planning and saving ahead of time can evidently make your home buying process less complex.