Surprisingly, it’s the millennial generation driving the real estate market today.
Housing experts predict an intense house-hunting season for the largest group of homebuyers.According to an article by cnn.com, millennials represent about 45 percent of all home loans. Most millennials home buyers are “property virgins,” having never owned a house before. First-time homebuyers have a distinct advantage when it comes to loan programs because of a variety of first-time home buying programs and loans. So, it’s important for aspiring home owners in their 20s and early 30s to press forward by applying for mortgages even though they have less experience to leverage in the competitive house hunting season. By relying on an experienced real estate team including lender and real estate agent, it’s easier to face the challenging seller’s market.
Making a smart financial decision
According to author Christine Romans, the author of “Smart is the New Rich: Money Guide for Millennials,” some millennials feel afraid to talk to their potential partners about debt. She advises millennials to temporarily move back in with their parents as they save up money for a down payment on a home. It’s not a sign of failure to rely on family as much as a sign of wisdom. The key is to give your parents a specific timeline based on the money required to buy a home. Don’t become complacent while living at home or promise to pay rent. Instead, remain transparent about the goal of home ownership while working on every financial angle and house hunting. By house hunting with your parents, you often get intelligent input as well as help them appreciate their investment in you.
Living on one income
Married couples and partners often have a financial advantage when each person works. Some couples live on one income while saving the other paycheck for a home. But even if you are single with children or without, it’s possible to get into a similar situation. Either work a freelance job on the side to save up the down payment money or rely on parents who want to see you become a successful home owner.
Facing tighter lending requirements
Millennials face tighter lending requirements compared to baby boomers and members of Generation X who bought during the housing boom a decade ago. At the same time, the lending environment is slightly less strict than it was after the housing crisis. The key is to boost your credit score and work on a good debt-to-income ratio. Millennials enjoy lower interest rates unlike many baby boomers who bought homes in the 1980s and 1990s. Because interest rates will likely go up within the next few years, it’s important to set goals now. While some experts criticize millennials for spending too much money on avocado toast and other expensive treats, torturing yourself isn't the answer. The fastest way to save up money for a down payment is to temporarily get rid of all major expenses or make another major life change such as work a second job. If you have the stamina to work long hours, consider side jobs. Otherwise, talk to family or friends about living with them or downsize to a small studio apartment until you have the money you need. With low inventory and hot competition for homes, it's critical to have cash and as little debt as possible.
When it comes to financial wealth, most studies show home owners have more money for retirement and for sending their children to college. Some parents tap the equity in their home when paying for children’s college tuition. Without a home, it’s not as easy to build wealth. At Equity Prime Mortgage, we assist millennials and others finance their homes. For more tips for millennial home buyers, please contact us.