People used to think that most millennials are struggling financially and they have very little knowledge on financial literacy. Most people also think that they would never buy homes and they would prefer renting because of the convenience it gives. But millennials are realizing the benefits of investing in a house and lot. In fact in 2020, experts had reported that the millennials are projected to buy the most houses and it would not be a surprise anymore if millennial home buyers may pass baby boomers and Gen Xers. More and more millennials are making this big decision, but are they doing it the right way?
If you’re a millennial looking to buy a house for the first time, here are a few tips that will help you achieve a hassle-free home buying experience.
The first step is paying off your loans and debts before anything else. Student loan is one of the biggest challenge facing millennial home buyers. Buying a house might be the most expensive purchase you’ll ever make, therefore you need to be debt-free before buying one. If you have any debt, get on a budget and pay it off faster for your dream home.
Save for the Down Payment
So now you are debt-free and you’re ready for the next step – the down payment. First time home buyers especially millennials usually don’t pay cash for their first home, therefore it is important that you have a strong down payment to lower the interest rate and to also to help you pay off your mortgage even faster. The recommended down payment is 20% so you’d bypass the PMI, an additional insurance lenders make.
Hunt for an Affordable House in the Market
The value of homes rises. Even now that we are in the middle of a pandemic, the value keeps on increasing especially those that are strategically located and rising home prices could be the most frustrating hurdle millennials face.
On the plus side, mortgage interest rates are super low which means a lower monthly payment and less of your money going toward interest over the life of the loan.
If you want to figure out which mortgage you can afford, use this free tool, a simple mortgage calculator to figure your monthly payments for a given loan amount. This is a basic calculator that quickly figures the principal and interest payments on a fixed-rate loan.
How to use the calculator? It’s so easy. You just have to fill in the values needed in the Loan Information such as the home price, the down payment, the annual interest rate and the loan term. You need not fill in the “home loan amount” portion as the calculator will automatically compute this with the difference between the home price and the down payment. The bigger the down payment, the smaller your loan amount would be. Don’t forget the recommended down payment of at least 20% to avoid paying for insurances.
For the annual interest rate, you can inquire it from the lender or you may use the current mortgage rate calculator at the bottom, to find the best rates available based on the location or area.
Buying a house for the first time is truly exciting especially to millennials who value the importance of freedom and privacy, but always remember that patience is key. Don’t give in to the temptation and buy a home that’s out of your price range. Always be wise with your decision as home buying is not the only financial matter that you have to face.