Most people often think that millennials are the generation who are struggling financially because they have very little knowledge on financial literacy. People see Gen Y’s as the type of people who would prefer renting than buying because of the convenience, comfort and flexibility living in rental properties. But nowadays, 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. It would not be a surprise anymore if millennial home buyers may pass baby boomers and Gen Xers when it comes to investing in a house and lot.
Even amidst this pandemic, more and more millennials are making this big decision, but are they doing it the right way?
To millennials looking to buy a house for the first time, here are a few tips that will help them achieve a hassle-free home buying experience.
Since buying a home is probably the biggest financial decision in your life, being free from any kind of debt is the first step when buying a house for the first time. For millennials, it’s the student loan that might be the challenge they will face first. If you have enough money to pay-off every cent of your loan – car, credit card, appliance, gadgets – do it before making another major loan that could affect the stability of your finances and your credit score.
Save for the Down Payment
After freeing yourself from debts or loans, you’re ready for the next step which is the down payment – an initial payment made when something is bought on credit. Remember that it might take your savings to make the down payment on the house you like, so make sure you are ready for that situation.
First time home buyers 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 avoid any other fees or insurances. It is recommended to pay 20% down payment so you’d bypass the PMI, an additional insurance banks or lenders make.
Search for an Affordable House in the Market
Even now that we are in the middle of a pandemic, the value of real estate properties keep on increasing especially those that are strategically located. Increasing home prices could be the most frustrating obstacle millennials face in home buying.
On the positive side, mortgage interest rates are super low nowadays which means a lower monthly payment and less of your money going toward interest over the life of the loan.
To help you figure out which mortgage you can afford, you may use this free tool, a an online mortgage calculator to compute your monthly payments for a given loan amount. This basic calculator can quickly figure the principal and interest payments on a fixed-rate loan.
Using the calculator is so easy. Just 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. No need to 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. If you can pay bigger down payment, the better because it will decrease your monthly mortgage or shorten the years you have to pay for your loan.
The annual interest rate is set by 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.
For millennials who value the importance of freedom and privacy, having their own space for the first time is truly exciting. But always be patient before making any financial decision. There are a lot of temptations out there, a lot of fake marketing strategies – don’t give. Buy a home once you are financially ready and choose the one that’s within your price range. Home buying is not the only financial matter that you have to face, therefore you must always be wise with your plans.