Millennials are at the age where they are moving out of their apartments and into homes. Many people misunderstand and mislabel millennials as being passive about home buying, but their motives aren’t the same as previous generations. It is common for a person in the millennial generation to want to buy a home for the simple reason that they have pets and want a backyard. Others are considering buying a home to build up their investment portfolio, something to quickly spruce up and rent out.
While the reasons for purchasing a home may be different from generation to generation, there is still one variable that remains constant, and that’s money. To buy a home, you’ll either need a significant amount of cash on hand or, like most, you’ll need to learn about the world of home loans. Many millennials have gone through the experience of leasing or buying a car, but a loan for a house is a much bigger responsibility. There are a variety of loans to choose from, so it’s important to know which loan will work best for you. If you are a millennial trying to understand more about home loans, continue reading.
The Bigger the Down Payment, the Better
Most new homebuyers are relatively uneducated about the down payments they will need to make when initiating a mortgage. While these amounts can range from 3 to 20% of the home’s total cost, they can be manipulated based on what you are trying to receive in your loan.
When it comes to saving money in the long run, it matters how much you put down on your home initially. The downpayment can set the tone for the rest of your mortgage and even influence your interest rate for years to come. It’s always best to have a good start, especially for a loan that will take such a long time to pay off.
Know What Loans You can Afford
Knowing how much you can afford to pay per month is the first step in getting a home loan that’s perfect for you. While millennials are typically hesitant to accept more debt in the form of a loan, they can understand the value of working diligently towards accomplishing a goal. When it comes to loans, consistent discipline will be required to make your monthly payments, regardless of what life throws at you.
If 2008’s financial collapse told us anything, signing an agreement for a home loan you cannot make payments for is a terrible move to make. However, this isn’t something new to millennials, as they are one of the most educated generations in the history of the world — while also having the highest student debt. Many of these millennials aren’t necessarily using their degrees either, so if you haven’t learned the lesson already, hopefully, you can learn it here before learning it the hard way. The difference would be that this time it’ll be much more money to pay off.
Be sure to choose a loan that fits your wallet, both now and in the foreseeable future, so you can enjoy your home as the castle it is, not the money sink that it could be.
Raise Your Credit Score
Another growing concern for millennials is their preference for debit cards over credit cards. Although this helps to ensure that you never spend more money than you currently have, it also prevents you from building credit and raising your score.
A good credit score is built with time and consistency and can help to lower your overall payment over the life of your loan. This is because the strength of your credit score enables you to be eligible for better or more flexible loans.
Millennials should be aware of their credit score and do everything they can to make their payments on time. Start as early as possible to show responsibility with money.
Think Ahead About Your Career
Millennials love to explore new career paths to find the perfect job for them, but this lifestyle has its pros and cons. While they get to experience a myriad of learning opportunities, growing into a jack of all trades, they also tend to lack the depth that comes with earning more money. This comes into play when considering income stability.
It is crucial to internalize how long-term a home loan really is. Young homebuyers need to be sure of how long they expect to live in the house they are looking to buy, as well as if they plan on making career changes. If you only plan on staying in that home for a few years, then purchasing it may not be the best plan of action. Choose to settle down when your career path has stabilized enough to provide economic certainty while paying for your home loan.
Plan and Execute
Finding the right loan for you can be a long process, to say the least. Planning is the best thing anyone can do when deciding to take out a loan. As millennials are more accustomed to getting and receiving information and goods faster than ever before, this might be the hardest pill to swallow. The more time taken to determine what works best, the better off you will be in the long-run. Consult with your bank to find the right information and solutions for your needs or use a loan calculator online to prepare for what’s to come.
A great plan will feel more like freedom than a rigid, inflexible life situation. You’ll steadily cross the finish line of your loan payment instead of struggling and stressing the entire journey. Plan for the future and you’ll pay off your home loan with ease.