More and more millennials are looking to make the move from renting to owning a home of their own. We’ve compiled a list of quick handy tips to help millennial first-time home buyers get started with the buying process.
1. Dedicate your savings – Set up a dedicated savings account specifically for your home purchase. Add money from every paycheck, your tax return and also any monetary gifts from family or friends.
2. Use a side hustle to boost your savings – If your schedule allows, pick up a side hustle to help you bulk up your dedicated home savings account faster. Look into dog walking, house sitting, cleaning houses or other helpful tasks your friends and neighbors frequently look for.
3. Clean up your credit – Check your credit reports from all three major credit bureaus and clear up any inaccurate information. Also look for outstanding debts that could have fallen off your radar and get those paid up. Your credit report will have a major impact on the interest rates and terms you’ll be able to get from lenders.
4. Avoid new credit – In the 6 to 12 months prior to doing your mortgage application, do your best to avoid adding new credit accounts such as car loans and credit cards. When you acquire new credit, the “hard inquiry” credit check plus the change in your debt to income ratio can drop your credit score for several months. You want your credit score to be as high as possible when you do your mortgage application.
5. Consider a mortgage broker – Working with a qualified mortgage broker gives you the option of shopping around for the lender willing to offer the best rates and terms for your home purchase. The mortgage broker sorts through the offers from various lenders and presents you with the best ones to choose from.
6. Wait for a pre-approval letter from a lender – While doing a pre-qualification is often faster, there is no commitment from the lender to follow through with offering you a mortgage loan and the pre-qualification amount is a “best guess” by the lender based on a “soft inquiry” of your credit. However, when you have a pre-approval, the lender has committed to providing a mortgage loan up to a specific amount. This shows sellers that you are a serious buyer with your funding already secured.
7. Pay attention to expensive repairs – Once you start touring homes you’re interested in, make sure you pay attention to expensive home repairs to ensure you won’t have a big bill right after you move in. Typically, the most expensive repairs or replacements in a home include the HVAC system, appliances, windows and the roof.
8. Be aware of HOAs – Always check if the home you are interested in is part of an HOA (Homeowners Association). Depending on the type of home and the amenities provided in the community, HOA fees could increase your monthly housing costs anywhere from $200 to $500 per month.
9. Never waive the home inspection – The home inspection is for your protection as a buyer. The inspector looks for major and costly problems with the home and can answer your questions about different features and details about the home. It’s important to set aside time to attend a thorough inspection, take notes and ask questions. The home inspection is one of the best ways to not only check for problems but also learn about your new home.
As a first-time buyer, the home purchase process can seem complicated. We’ve compiled this handy list of quick tips to help you get started. Keep in mind that your real estate agent is an experienced and knowledgeable resource who can answer questions and help guide you through the process all the way through closing on your home and having a key in your hand.