For the fourth consecutive year, millennials are the largest group of home buyers (34 percent), according to a recent study by the National Association of Realtors. Home ownership is a top priority for this generation and as job confidence and incomes rise, many are looking to purchase their first home.
In many parts of the country, millennial home buyers are facing a hot housing market. The number of homes on the market dropped between 15 and 20 percent in New Jersey in the past year, leading to major increases in listing prices. As competition for homes continues to soar, how can millennials purchase the house of their dreams?
Here are five tips to help navigate the current housing market:
1. Get your finances in order.
Lenders will first look at your current debt (car loans, student loans, credit card payments, etc.) and credit score. Before you even start looking for a home, evaluate your debt and get copies of your credit reports to make sure you’re in a strong position to get approved for a mortgage with a good rate. You should also have saved for a down payment which is typically, 5 to 20 percent of the sales price to qualify for a conventional loan.
2. Tap into technology.
Leverage your tech-savvy capabilities to simplify the home buying process. Online tools can help you calculate how much a mortgage payment will be, evaluate which type of mortgage is best for you, and determine the how much you can afford. We offer a variety of home financing calculators on our website to help you. Millennials are also the most likely generation to search for homes online and should use credible websites such as Realtor.com, Homes.com or Zillow.com to help narrow down locations and home features. Zillow recently launched RealEstate.com to help first-time buyers become actual homebuyers and allows buyers to search for a home by their preferred down payment and monthly mortgage payment.
3. Find experts you can trust.
Although home searches may start online, millennials value the expert advice a real estate agent offers throughout the house-hunting and buying process. According to NAR’s 2017 edition Home Buyer and Seller Generational Trends study, 92% of millennial buyers used a real estate agent. An experienced agent can help you find a home that meets your needs, tackle the paperwork, negotiate offers, and avoid closing problems. You should also find a mortgage lender that will guide you through the process. A good lender will have a solid reputation, be able to offer advice on the type of mortgage that fits your finances, and answer any of your questions along the way.
4. Get pre-approved for a loan.
Getting pre-approved for a mortgage may give you a leg up in a competitive housing market. Mortgage pre-approval is essentially a promise from a lender that you’re qualified to borrow a certain amount of money at a specific interest rate, subject to a home appraisal. During this process, a lender will closely review your credit and verify your sources of income. Once you’re preapproved, a lender will provide a mortgage preapproval letter that you can share with your real estate agent when you’re ready to make an offer.
5. Remember first doesn’t have to be forever.
Millennials are very focused on finding a property well within their budget – a result of steep student loan debt coupled with home prices outpacing wage growth. It’s important to remember that a starter home can be a stepping stone toward your ultimate dream home. And it doesn’t have to be a fixer-upper, it can be a smaller home or condo you can afford now that doesn’t need too many improvements.
As a first-time homebuyer, you’re sure to have questions. Our mortgage experts can walk you through the mortgage application process, explain all available mortgage options and help you make the best choice. Contact one of our mortgage representatives to request a consultation.