Buying a home is one of the most significant financial commitments you will ever make in your life. It may appear to be a daunting task, but a few simple tricks can make this task much more manageable.
Unfortunately, fewer Millennials are buying homes these days. They are also buying homes at a much later age as compared to previous generations.
There are several reasons behind this. One of the most important reasons is student debt. Student debt has soared to $1.6 trillion in the US. It is the biggest obstacle preventing Millennials from buying a home.
Similarly, in a 2018 NAR report, 50 percent of prospective millennial homebuyers cited student debt as the main reason behind their inability to purchase a property. Debt-free college graduates take 7.6 years to save for a 20 percent down payment. Debt-laden grads take four years longer.
There are also other factors as well, which include:
- Consumer debt (auto loans and credit card debt)
- Delayed marriages
- Higher home prices
- Tighter lending
- High preference for rental properties in urban areas
Despite these hindrances, Millennials should not lose hope. Suddenly, it seems like buying a home is more within reach for Millennials who want to make lifestyle adjustments.
A smart strategy involving initial financial planning can make the American Dream a reality for Millennials. Here is how it can be done.
Pay off your debts
You obviously have to pay off your debt before thinking about buying a home. But this must be done quickly.
It will take you longer to buy a home if you take too long to discharge your loans. This can lead to a significant drawback.
You may have to pay a mortgage payment well into your retirement years, which can reduce your savings. Successful retirement planning will not be possible this way.
A comfortable retirement is a fundamental reason for buying a home. The results of a study by the Urban Institute show that owning a home in your early years leads to a better retirement.
Smart Millennials are using a simple strategy to discharge their debts quickly, such as couples moving into a single rental property together.
This strategy allows them to save their money from being wasted on extra rent. The money saved is then used to pay off liabilities. Even if you are debt-free, follow this simple plan.
Saving on rent is one of the critical steps of buying a home. However, you should also save on other expenses.
Millennials often spend inordinate sums on travel, entertainment, and shopping. Cutting down these expenses will allow them to save money, which can discharge their liabilities and buy a home.
There are many ways you can save for a down payment and the subsequent mortgage.
Pay yourself first. As soon as you receive your monthly pay, set aside a fixed substantial amount as savings. This process should be automated. You can arrange to automatically add fixed amounts from your salary to your savings account.
Speaking of savings accounts – the best place to save is in a high-yield account like the CIT Savings Builder, which offers up to 2.10% APY! That’s one of the best on the market.
Also, look for alternative investment sources. CDs often yield higher interest than the returns generated from savings accounts. Transfer your savings to the most lucrative CDs. Money market accounts can be even better.
Select the best loyalty program to save on shopping. There are plenty of great customer rewards programs for this purpose. This way, you can save a lot of money eventually.
Carry out an energy audit of your residence. This will help minimize your utility bills.
Get rid of the TV cable. There is no need to pay the hefty cable subscription fee when you have better and more affordable options, such as Netflix, Hulu, Amazon Prime Video, and more.
Learn to reduce, reuse, and recycle. This is great for your finances and the environment.
Briefly, there are plenty of smart tips to save on the most common expenditures. You can undoubtedly think of more saving ideas.
Note down all the costs
Be aware of all the expenses involved in buying a home. You can then save according to the total amount.
Buying a home may appear to be a daunting endeavor due to these costs. However, once you buy a home, you can build your equity fast.
Most homes’ value often appreciates considerably. You can purchase a property and then sell it when it appreciates in value. Many people have made a lot of money this way. Besides covering these costs, you will also gain considerable wealth.
Master negotiation skills
Negotiation skills are essential at all stages of your life. They are particularly important for home buying.
You can use several tactics to negotiate successfully. However, when buying a home, remember these two simple things:
- Keep your cool
- Avoid rushing
Remain poker-faced throughout. Don’t reveal your excitement at any point. No matter how appealing the property is, appear stoic.
If the property owner notes your enthusiasm, then you can expect a hefty initial offer. A high initial offer is never good if you are looking for a bargain. This is something that all successful negotiators know.
Start with a significantly low initial offer, and look for reasons to justify your low initial offer. You can point to the seller that the property is old, needs renovation, or is located far from the city center. In other words, look for defects and cleverly highlight them.
Also, don’t be impulsive. Take your time. Even if it appears to be a good bargain, never rush in to close the deal. Tell the property owner you need time to ponder over the offer.
Discuss the offer with knowledgeable people whom you trust. Tell them all the facts. You can gain a lot from the insights and advice of well-informed people.
Rushed deals are the main reason for regret later on. Don’t let this happen to you. Conduct your research on the art of successful negotiations.
Look for the best states
Don’t limit yourself to the place where you currently live. Some states have high property values. Others offer much lower prices. Be informed about the best states and most expensive states for property buying.
Avoid Colorado and California (no matter how cool they are)
Colorado and California are appealing to young Millennials. They offer a vibrant culture, excellent recreational opportunities, and have even legalized marijuana. However, the reality is that they are the worst states for property buying.
According to HuffPost, the median list price for a property in Colorado is a hefty $408,068. In California, the amount is an exorbitant $499,950. Hawaii is even worse at $599,000.
West Virginia is the most affordable
West Virginia appears to be the most affordable state for property buying. The median list price is only $150,000. This is a very economical amount in the competitive housing market. The median income of Millennials is $60,932. Using these numbers, you can probably save a 20 percent down payment in just a couple of years.
Ohio comes in 2nd
The next best state is Ohio. The median list price here is just $154,000. This is marginally higher than West Virginia.
Arkansas comes in 3rd, then Indiana and Iowa
Arkansas is the third-most affordable state. The median list price for a house stands at $164,900. On average, Millennials can save for the 20 percent down payment in around 2.7 years.
Indiana and Iowa are also among the friendliest states for Millennials seeking property.
Scout for a good mortgage
For the lowest possible interest rates and most straightforward terms, compare offers from different lenders.
LendingTree can help you make this crucial comparison. A costly mortgage is a cause of frustration for many new homeowners.
LendingTree is an online marketplace for loans. Through LendingTree, you can connect with many lenders and compare their offers. Hence, you can get the best mortgage deal.
Even minor differences in mortgages can have a significant impact on the long-term. With the second-best deal, you can quickly lose thousands of dollars. Aim for nothing less than the best deal. So be careful about selecting the right lender.
Owning a new home is stressful. But it is not as hard as most Millennials think. With the strategies outlined above, you can become a homeowner sooner than you think.