Millennials are now the most significant cohort of homebuyers in the housing market, taking over the baby boomers and Gen X, and many of them are first-time home buyers. Similar to the older generations, millennials have a lot to learn when it comes to buying a house. And if you belong in this generation as a first-time homebuyer, there are many mistakes that you would want to avoid:
1. Not saving enough money for the down payment
Saving money for a downpayment is one of the biggest hurdles that you have to overcome when buying a house. And for millennials that are just entering the workforce, putting away money towards a downpayment is easier said than done with all other expenses to take into account, such as student loans, rent, and basic needs. Moreover, if you buy a house that needs remodeling, you also have to consider building company fees.
While many lenders offer little to no down payment loans, these loans can have you paying an excessive amount of interest in the long run. Hence, it is more practical to wait until you have at least a 20% down payment saved before applying for a mortgage. Not only does this increase your chances of getting approved for a lower interest rate, but it can also help shorten your loan life.
2. Not taking into account other expenses
Apart from the down payment and mortgage payments, there are other expenses that you have to be prepared for when buying a house. You also have to factor in property taxes, maintenance bills, as well as realtor and inspector fees, just to name a few. If you’re buying a moderately old house, you also have to be prepared for possible repairs.
Having a steady income that can support your basic needs plus homeownership expenses is a good sign that you are ready to buy a home. Otherwise, wait until you have enough money to take care of both your family and your house.
3. Not getting a pre-approval
Getting a pre-approval from a mortgage lender is the best first step to the home-buying process. Lenders will review your credit score, debt-to-income ratio, and assets to determine how much of a loan you are qualified for. By getting pre-approved, you can have a definite price range to help you narrow down your choices to a house that you can realistically afford. Moreover, having a pre-approval letter will help sellers know that you are a serious buyer.
4. Not planning for the future
Consider the things that can happen five to ten years from now. If you are planning to have a child in the future, choose a home that has enough space. If you are planning to upgrade to a bigger house, choose a home wherein you won’t come out with losses. While your plans might not be set in stone, it’s a good idea to consider the future while looking for the perfect home.
Even if buying a home is still far off in the future for you, start looking into the process as early as now. In this way, you know what mistakes to avoid and how you can make the home-buying process as hassle-free as possible.