By Chris Caggiano
One common myth that pervades the real estate field is that millennials (individuals born between 1981 and 1997) are shying away from homeownership due to a lack of interest. However, the numbers and data show something very different. For example, recent Fannie Mae and The Demand Institute surveys of millennials substantiate that 75% to 90% of millennial renters hold homeownership as an important long term goal. Furthermore, 48% of millennial respondents who participated in The Demand Institute survey said they plan to make the move from renting to owning within the five-year post survey period.
If you are a millennial who is ready to start the process, I offer six robust tips to set you on your path:
There are a multitude of programs that help individuals, including millennials, to start the Prequalification process. Many such programs have options for a lower down payments and lower out-of-pocket costs. Consulting a mortgage broker to gain a sense of various products is a good idea since mortgage professionals have access to a variety of products that meet different needs.
The mobile revolution has allowed for the instant purchasing of products and services with the press or swipe of a button. While many of us enjoy the benefits of having access to almost everything at our fingertips, home buying is different. The decision to buy a home is a big financial undertaking that requires time and research. If this is your first experience with the home buying process, it is important to take a measured approach and to get help from an expert or a team of experts including a realtor and a mortgage broker.
Your credit score is one of the most important factors in the home buying process. Lenders view your credit report like a report card with scores serving as indicators of your likelihood to repay loans. The higher your credit score, the lower your monthly payments will likely be. If you don’t know your credit score, take steps to find out where you stand. You are entitled to one free credit report from each of the three credit bureaus every year. Once you know your credit scores, be sure to nurture it and guard it by knowing how credit works and by protecting your personal information against identity theft.
Work history is a factor in the process as lenders tend to look for stability. In most cases, a two-year work history at the same company or within the same field will suffice. Exceptions are not out of the question depending on the case; for example, school can sometimes be considered as part of a history. The point is to avoid job-hopping if you are planning to purchase a home.
Do a personal assessment on what a “decent-sized” place means for you (and your family if you have one). There are many options including condominiums, townhouses, and single family homes. Also, think about what your life could look like over the next few years and how home size will help facilitate your lifestyle. This is not about keeping up with anyone else; it is about your needs.
Pre-qualification is a beneficial step in the process as it helps to set you on course as a potential buyer. It also sends a message to sellers that you are a serious buyer who is not just "window shopping". The process entails working with a mortgage broker to take a more detailed look at your current situation in order to determine eligibility.
All said, home buying is a process. Although it includes many steps, homeownership is an attainable goal if you approach it with the right amount of preparation, support, knowledge and resources.
Chris Caggiano is the founder and president of Grand Oaks Funding, LLC