No doubt, buying a home is a decision close to heart for many. When you are opting to buy out the first house, you have a feeling that this is only a stepping-stone for the big picture goals of your life. There is a wide gap between the perception of your parents and Gen Y. Therefore, 20% millennial has an opinion to buy a home at a younger age. According to the reports, more than 85% of millennial buyers opine that buying a home is affordable than renting. About 50% of the respondents of the people surveyed by the Bank of America confirmed that they burdened by high rent, which is nearly 30% of their income.
Taking a decision to buy a home itself is a smart financial move. There is nothing wrong if a majority of the millennial need some guidance and support, especially if the purchase is for the first time. Though there are some voluminous guides on the web about home buying, it might be difficult to glean the info or the requirements may not be suitable for you. Envisaging your predicament, we have summarized the tips for you:
Know the Basics
Getting your calculation correct is always advantageous. Hence, there are no surprises in the process. When you are looking for a home, you should know certain concomitant inclusions in the bargain. You should consider the brokerage, moving-in costs, and the maintenance charges. In other words, you should know what the total closing cost is for you. Experts on the subject estimate that 4% of the purchase price towards variables is a reasonable amount.
Once you arrive at the all-inclusive cost, you need to incorporate the down payment, which generally is about 20% of the traditional mortgage loan.
Your credit score determines the eligibility for your home loan. While contemplating a home loan, you should be on the lookout keeping a track of the credit report. This will help you in noticing some probable errors without your knowledge. In case you come across any discrepancies in the report, you can raise the dispute with the three major credit bureaus. Consequent upon investigation by the credit bureau, the credit account would be validated within 30 days.
Pre-close other Accounts
You will agree that buying a home is a long-term plan and therefore, when the first thought sparks in your mind, try to close as many credit accounts as possible. It would be wiser if you do not open any new accounts in the preceding period of seeking a mortgage loan. This would facilitate a smooth processing of hard credit enquiry, which is a requirement for any creditor proceeding further. Your eligible amount would be based on the credit score and the credit report. With the least credit accounts at the time of the credit report would boost the chances of qualifying for a higher amount.
Before short-listing a home and then approaching the creditor for a home loan, it is always prudent to get the loan pre-approved. The pre-approval process is easy with no cumbersome compliances. In fact, you can approach the financial institution or any lender like Simplifi loans over the phone or online for assessment based on the following documents:
- Tax returns for the preceding two years.
- Wisconsin-2 (W2) form issued by all the employers during the last two years. This is a federal tax form issued by the employer indicating how much the employee has been paid during the year.
- Quarterly statement of all asset accounts including investment accounts
- Savings Bank account statement of the banks especially from where you desire to make the down payment.
Unless you have any unusual entries of either credit or debit, based on the above documents, the creditor would issue the pre-approval of the home loan.
Once you receive the pre-qualified loan letter, you can start looking for the homes within the budget.
Though the thumb-rule stipulation of 20% of purchase value exists, there are other avenues permitting lesser down payment. Some of the alternatives you can explore are,
FHA Loan: No doubt, 20% down payment may not be possible for everyone especially the first home buyers. Federal Housing Administration comes to the help of such buyers with a reduced down payment as low as 3.5% to mitigate the hardship. The FHA loans with a reasonable credit and encouraging initial down payment are very popular among the Millennial.
VA Loans: The Department of Veterans Affairs (VA) guarantees the loan for the benefit of those who served the military. If you are one among them, you can grab the opportunity in availing the cheapest credit options. The VA loan is allowed without mortgage insurance or down payment either.
Further, you might qualify for the programs, which assist the down-payment of the purchase value.
Compare Mortgage Rates
No doubt, competition among the lenders facilitates borrower some concessions or incentives. Therefore, it makes sense to get the loan estimate from at least three lenders. You can drill down the “closing cost,” which includes the fee charged by the creditor. It generally ranges between 2 to 5 %. In addition, there may be some other charges or incentives offered by some other lender.
One of the better options is to compare the loan estimate by simplifiloans.com and other lenders. In order to earn your trust, they offer you unparallel service leveraging the state-of-the-art technology.
Reliable Real Estate Agent
The selection of the real estate agent decides how smooth the process would be. If you make a mistake of opting for an agent without much groundwork, you might regret that the agent did not conclude a favorable deal for you. You should never undermine the process of selection of a dependable real estate agent who protects your interest too in an unbiased way.
If you are one of those Millennials to own a home, it’s the right time for a final decision and action since presently, the economy is consistent. Postponing the decision would only add to your financial burden. However, it is encouraging that 60% of the millennial buyers are in favor of saving for buying a house soon. Do not miss out any of the above tips for a better deal.