Home ownership – it’s the American Dream to own a piece of land that you can call your own.
Home is where the heart is and within those four walls you are royalty.
As a millennial, if you have gotten to the point in life where you feel ready to make the leap, then there are quite a few things to take into consideration before buying your first home. While saving is obviously going to be a pivotal point, there are a lot of other factors that come into play.
If you’ve had your eyes on that dream home for sometime, consider the following tips for buying your first home.
You’re going to need to save and reduce your debt.
As a millennial, you might be in the initial stages of your career, which means you’re making enough to pay for living expenses – and that’s about it. Consider supplementing your finances by taking a second part-time/contract job or try to get overtime if possible.
Sadly, this also means cutting back on all those discretionary expenses. Eating out, taking trips, weekend entertainment, and impulse buys can hurt your purse. Consider tracking your spending over a month or two to find out where you need to cut back.
Marriage and a house?
The two are intertwined like peanut butter and jelly. And while moving into that new home right after your wedding is ideal, it can be challenging to manage the two. With the average wedding costing over $26,000, cutting back on wedding-related expenses is essential. Consider what’s truly more important for you and your partner (if you have to decide between an expensive wedding and your first home) and go from there. There are a number of online resources and books that provide tips on how to cut back on wedding costs.
Just because your friends jump off a bridge…
It’s important to recognize that buying a home is a serious commitment. It’s not like buying that new smartphone or 4K TV. Homes are a lot more expensive and you shouldn’t rush into a decision just because the people around you settling down.
Also, don’t feel pressured by a “hot” market, as you don’t want buyer’s remorse on a house you’ll be living in for years (if not decades). Take your time, do your research, and allow the process to work itself out. Even if you are financially and emotionally ready to purchase a home, you don’t want to overpay because you couldn’t wait for a better deal.
It’s not just a home, it’s the neighborhood too.
What type of person are you and what type of environment do you see yourself in? Do you enjoy a vibrant social or music scene? Then perhaps a home closer to all the action is better for your needs. Are you a young professional with a child? A quiet neighborhood in a great school district is probably a better investment for you. You’ll want to find an area that matches with your lifestyle (or at least as best as possible).
Understand your credit.
Your credit scores are also going to play a major role in whether or not you can get that dream home of yours. Before you take any other steps, make sure that your FICO scores are up to par, and if they aren’t – fix it. There are a number of online services that can help you manage your credit scores (like Credit Karma) and help to get you up to at least a 720.
Know the costs of buying a house.
Buying a house is more than just a downpayment and mortgage (and even these two can get complicated). For one, it’s important to understand that there are closing costs and a hosts of extra purchases that will need to take place before you can call that house your home. Fees for inspectors, appraisers, credit checks, and again, those closing costs, mean more spending.
There’s also the large expenses you may not have taken into account. From necessary appliances like fridges, to items you may not have considered like blinds, and even paint, expect to be surprised by purchases that hadn’t crossed your mind before those keys were in your hand.
Then there’s the behemoths: the down payment and mortgage. While the traditional notion was to put 20% down, the reality is that finance companies are a lot more willing to work with you than ever before. And while you don’t have to have ten of thousands of dollars at your disposal for a down payment, you’ll still want all of your finances in order to A) prove your fiscal ability to pay the mortgage and B) help you understand how much you can afford.
As for your mortgage, it’ll vary depending on your down payment, interest rates at the time, property taxes, homeowner’s insurance costs, mortgage insurance, and any homeowner’s association dues that might apply. You’ll want a full disclosure of all the varying costs so that you can match up with your financial situation.
Don’t forget that inspection.
Don’t be so eager that you forget to get the house inspected properly prior to purchasing. While you might think you have enough skills to deal with some of the minor cosmetic needs, you’ll want a professional to let you know about any major issues, such as bad plumbing or electrical wiring.
Also, you should make sure to inspect everything yourself. Any unidentified issues means you are responsible for fixing them. Safeguard your investment and inspect everything. Any major repairs need to be done? Hold the seller accountable before signing the contract.
Use a realtor.
Get yourself a realtor if you are house hunting. They offer you a lot of guidance and support to help you avoid making bad decisions. Plus, they tend to know contractors, plumbers, and other individuals who can get you on the right path to homeownership.While there is a ton of information online (ironic I know), you’ll definitely want the help of an experienced professional to help you through the process.
And there you have it millennials, a couple of tips to help you get going on the path of owning a home and grownup-ship. Don’t worry – we know you’ll be great at it.