With U.S. mortgage rates near all-time lows, the appeal of purchasing a home has become much more enticing. For those who currently own, those lower rates mean looking into refinancing options to lock in lower rates; for those who rent, this may provide a nice entrance into home ownership.
According to the most recent National Association of Realtors® Home Buyer and Seller Generational Trends report, the demographics of first-time homebuyers has shifted over the last century. The current median age sits around 29, with over 65 percent of homebuyers under the age of 34.
Below are five tips, catering specifically for older Millennials who are looking to plunge into homeownership for the first time.
1. Have Stable Employment and a Robust Savings Account
Your financial security is of the utmost importance when looking into any large purchase. If you are unsure of the likelihood that your job and a steady paycheck will be there in 6, 12, or 36 months, you need to step back and logically assess how probable it is you can keep afloat while paying off a home for the next 30 years.
As with any basic personal finance advice, it is wise to have a substantial savings account. Particularly for large purchases such as homes, making sure there is a financial cushion to fall back on in case of unthinkable circumstances should be a determining factor when you are looking for your first home.
2. Understand and Adhere to Budgeting Strategies
If money management is not a strong suit, it will pay off to get down to business and take the time to invest in your financial literacy. Without basic financial know-how, taking on a loan for hundreds of thousands of dollars might not be a wise move for your long-term financial portfolio. Make sure you understand exactly what you are getting yourself into, how you will afford payments in the years ahead, and how you will handle unplanned financial obstacles.
3. Have a Healthy Credit Report and Know How to Handle It Responsibly
When applying for home loans, a healthy credit score is your MVP. Without stellar credit, you could find yourself paying far more than you should. Take the time to make sure your credit tells a story of a financially responsible individual, and you are bound to see the rewards.
Remember: Your credit reflects who you are to lenders. It’s a snapshot into how you have handled credit in the past and provides an educated guess as to how you will act financially in the future.
4. Understand Loan Approvals
It’s easy to become swept away by the glamour of home shopping. The excitement and possibilities can lead to pricy immediate gratification, instead of financially sound judgments. It is incredibly tempting to look at approval amounts as permission to push your budget, particularly when submitting loan applications and receiving approvals. Simply because a lender says you can borrow a certain amount, does not mean it is the wisest decision. Approvals are meant to be guidelines and firm upper limits, not excuses to push your budgeting envelope beyond its comfort zone.
Ashland University Professor of Finance and CFP® Terry Rumker says, “You should decide how much you are willing to spend each month on your home — principal, interest, insurance, and taxes combined — and then figure out how much money you are willing to borrow. Not how much a bank is willing to lend.”
5. Critically Assess the 20% Down Payment Rule and See if it Makes Sense for You
While the debate on how much to put down on a home purchase has been going on for decades, with the most frequently touted advice being that 20 percent is the golden rule, contracts can go forward with less — much less — brought to the table. Decide what fits best with your budget and if you would be okay paying (and affording) Private Mortgage Insurance (PMI), which could add possibly a couple hundred onto your mortgage payment on a monthly basis until you have paid that 20%.
Stop into any First Financial branch and we can help you with your home buying journey. We provide great low rates and offer a variety of Mortgage options – to speak with First Financial’s lending department, call us at 732.312.1500, option 4.*
To receive updates on our low mortgage rates straight to your mobile phone, text FIRSTRATE to 69302 and each time our mortgage rates change, we’ll send you a text message with the new rates.** We’re here to help you achieve your financial dreams!
*A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties. Subject to credit approval. Credit worthiness determines your APR. **Standard text messaging and data rates may apply.
Article Source: Rebecca Sheppard for Benzinga.com