Who doesn’t dream of one day owing their own home? It sure isn’t easy, especially with the drastic hike in real estate property. Many millennials think that becoming a house owner is only a dream for them. Fortunately, this is not true.
While buying a home is no easy feat, the good news is that with the right plan and some guidance, you can definitely invest in a great home. But, there are various things to consider when you are deciding to purchase a home.
Here are some useful first-time home-buying tips for millennials:
Set Clear Goals
Often people ask me for advice on how they can become homeowners. No matter what generation you belong to, my answer is simple: your goal must be clear. This can also apply to different aspects of your life.
However, having a clear goal in mind – becoming a homeowner – isn’t enough. You need to break this massive goal down to short-term and long-term goals. These goals will work as a roadmap to help you achieve your ultimate goal.
This includes creating a budget, making a few sacrifices, opting for small investments, and other decisions that will get you a step closer to being a homeowner.
Figure Out Your Priorities
Next thing that millennials home buyers must do is to figure out the kind of house they want. This includes factors like the size of the house, location, as well as your current and future lifestyle. Try to be as realistic as you possibly can, because it is easy to get carried away when it comes to visualizing your future home.
Make a list of things you don’t want to compromise on when buying a house. I would also recommend doing some research on your own by looking up real estate listings in and around your preferred location. This will give you a better idea of the type of houses available and how much it would cost you.
With a clear idea in your mind, you will be able to adjust your expectations accordingly. It will also help you determine if you need to create a tighter budget or make more investment, etc.
Save for Down Payment
Paying cash for your first home is almost impossible in today’s competitive market. A large majority of first-time home buyers, particularly millennials, opt for a mortgage. This is the reason why it is essential to ensure you make a large down payment.
Why? This will reduce the interest rate and help in paying off the mortgage faster. Aim at paying 10% to 20% down payment. If you manage to pay 20% in down payment, you will also be able to avoid the Private Mortgage Insurance (PMI), which is additional insurance you would have to pay that protects lenders in case you stop paying mortgage.
Start saving accordingly, but keep in mind this might take a few years. Don’t be discouraged; you are not alone. With student loans, high rents, and other expenses, many millennials struggle to save up. You just have to be patient and continue on the same path. This is also the reason why it is important to set realistic goals to avoid getting discouraged.
Apply for Mortgage Pre-Approval
Once you have saved up for down payments, you must attain a pre-approval for the mortgage. Getting pre-approved for a mortgage loan will give you a more realistic idea of what you can afford. Moreover, when you make an offer on a house, the seller will give you priority as a pre-approval means you are a serious buyer.
Sellers give preference to pre-approved potential buyers as this means closing the deal more smoothly and quickly as compared to the buyers without a pre-approved mortgage, even if they make a higher offer.
Keep in mind, if you get pre-approved for a high amount, this surely doesn’t mean you must borrow it all. Consider the payment you can easily make every month, along with other expenses. Moreover, there are other costs to be considered, including property tax, home insurance, mortgage interest, and principal.
Never try to stretch your finances too far. Be sure you can easily afford the monthly payments so you can truly enjoy living in your own house.
Don’t be Hasty
When you have successfully managed to save a sufficient amount for the down payment, don’t rush. I have witnessed many first-time owners making hasty decisions and as a result, they end up paying more or being unhappy with their house selection.
Once you start house hunting, it is tempting to think about increasing your budget to get a house you have fallen in love with. Trust me; you would end up struggling to pay the monthly mortgage payments.
Stay within your budget, and avoid sacrificing your emergency funds or your retirement funds for a home. Keep looking because you are bound to find the right home within your budget.
Ask As Many Questions as You Can
Buying a home is a major decision and is the most significant investment most individuals make in their lives. This shows how important it is to conduct a thorough research to make sure you make a smart decision. The best way to understand the process and clarify any confusion is to ask plenty of questions.
Ask your parents about the costs associated with being a homeowner, inquire about the property taxes and insurance fees from a real estate lawyer, take advice from fellow millennial friends who recently purchased houses, and consult a real estate agent to determine the type of houses and market trends available in your budget.
The more questions you ask, the more prepared you will be for this big decision.
Get Professional Help
Seeking help your family, friends, especially professionals, is an integral part of the home-buying process. If you are struggling with saving money or creating a budget, or are confused about the associated costs, then don’t hesitate to get help.
There are plenty of incentives and programs offered by the Canadian government to help first-time home buyers, which make this process easier for you. Consulting a financial advisor, broker and real estate agent (ME) is highly recommended to help you achieve your ultimate goal.
These professionals will make sure you are headed in the right direction, are well-informed about all the options available to you, and guide you through any confusion you may have so you avoid making any costly mistake in the process.
Indeed, it is not easy for millennials to save up for their first home. There are plenty of struggles involved throughout this process, but it is going to be worth it in the end when you receive the keys of your own house. As mentioned before, don’t be afraid to open up and ask for help if it is getting overwhelming for you.
Getting advice and hearing success stories of others is an excellent way to eliminate your concerns and stay motivated. Be sure to establish pragmatic home-buying goals, as well as a budget and stick to them. Remember these tips for first-time home buyers I have highlighted and you will surely be able to purchase your first home.