Between the lingering effects of the 2008 recession and the burden of student loan debt, millennials often face many challenges when entering the housing market as competitive buyers. But if you’re a millennial wanting to buy your first home, here are some steps you can take.
Pay Off Student Loans
Much of the millennial market is carrying student debt. With student debt hitting almost $1.6 trillion in the U.S. during the beginning of 2020, it isn’t a surprise that many millennials are discouraged by the housing market. According to the National Association of Realtors, more than 50% of home buyers under 36 said student debt delayed their home buying.
To comfortably afford mortgage payments, try first paying down your loans as much as you can and look at loan forgiveness programs. Debt from other sources also presents another barrier to entry for millennials. Squaring away any other debt will increase your credit score and help make way for mortgage payments.
Save for a Down Payment
A down payment on a house is essential for serious home buyers. A down payment is a portion of the price of the home that you pay upfront. Many home sellers will require a 20% down payment. So, start saving now. Additionally, the higher the down payment, the lower your mortgage interest rate.
There are many apps and online banks specializing in helping consumers save up for a down payment. For example, Ally is an online bank that offers a high yield savings account to store money for a future down payment. It also provides a feature to create multiple “buckets” to categorize your savings goals. Users can segment their savings into different costs associated with buying a home.
Purchase a Small Home
Your first home will likely not be the only home you buy in your lifetime. There are smaller homes on the market that cost less and are an excellent first-buy for millennials. When you are ready to move to a larger home, you’ll build wealth by renting or selling your smaller home.
Make Yourself Competitive
A lack of inventory in the housing market has increased competition amongst home buyers, especially here in Kitsap County (see our latest market stats). Therefore, you’ll probably be competing with buyers with more capital and/or experienced homebuyers who want to downsize. However, all is not lost; there are other strategies to make yourself more competitive. Having a great credit score, getting pre-approved for a home loan, and working with an excellent local real estate agent will help you stand out.
Although it’s an extra cost, an agent exponentially increases the chances of securing your first home. An agent puts their knowledge of the local real estate market to work. They will serve as your skilled advocate and guide. They’ll develop an excellent strategy, negotiate on your behalf, explain real estate jargon, get the inside scoop on listings, and refer you to excellent local vendors. Additionally, if you’re in the military or your partner is, many of our agents are well-versed in working with military families. Our local experts are always available for consultation and can answer any questions about purchasing your first property.