First-Time Homebuyer: Millennials Can Afford Houses Too!
I Promise! Millennials Can Afford Houses Too!
I became a First-Time Homebuyer with minimal savings, little to no-cash on-hand, and a middle-class income!
I think most people reading my first sentence would scream “Do not buy a home. You are not ready.” However, now that I have sold my first home, and have doubled my equity with my second home– all within a 2 ½ year timeframe– I would highly recommend taking the leap of faith!
I will not lead you on and say that the process was easy or will work for everyone, but there is absolutely no risk in starting the process and seeing what is viable in your current market.
For example, I was searching for a home in a buyers market and I had excellent credit, along with proof of at least one years of stable income (you will need to submit your tax returns for the previous year!). While I had a lot of indicators of good financial health– cash on-hand, or in savings, was not on my list of strengths! I always imagined buying a house as something only people with a large savings could do, but I soon realized that even with a very typical millennial budget and lifestyle, I had the qualifications to buy a house!
While I had a lot of indicators of good financial health— cash on-hand, or in savings, was not on my list of strengths!
Yes, I am a Millennial and I Bought A House, and You Can Too!
Start by getting a preliminary approval, because you do not have to buy a house after being approved, but the information you receive is SO worth the effort!
I had very little cash on hand and in my savings, I had an excellent credit score and low-credit card debt, I had a reliable middle-class career, and I had a college loan (of under 15K). I always assumed that my “homebuyer bio” was not good enough to purchase a home, but after going to the bank and doing a comprehensive check on my home-buying qualification, I was given a preliminary approval for a mortgage that was within the cost of most homes in my desired area!
I always recommend people to at least get a preliminary approval, because you do not have to buy a house after being approved, but the information you receive (what you can afford, or what you will need in order to buy a home) is worth the effort! I was aware of the major risks involved with buying a home, but I was not going to give up on:
The Opportunity To Gain Equity
Many Americans rely on their income as their sole safety net when it comes to anything financial. However, if an emergency happens, such as someone falling ill, or an unemployment notice– many American’s find themselves drowning in debt, or filing for bankruptcy. I knew that I had to diversify my worth, and building equity on a home was one way to begin that process.
The opportunity to take advantage of state incentives
Many states in America offer many incentives for first-time homebuyers. A lot of young buyers have no idea that they can actually purchase a home with no money down. In my state, there were incentives where I was able to buy a house with no money down, and the state would actually pay for my down payment, give me lower than market interest rates, along with many additional tax breaks and incentives. When I calculated all of the benefits, I realized that not only would I be able to buy a house with no money down, but I would also be spending less monthly to own a house than I was already paying for rent!
The opportunity to have independence
There is nothing more fulfilling and empowering as owning your own place and being able to design every room as your heart and soul desires. Unlike renting with its “no candles, no hanging anything, no painting, no fun” rules, as a homeowner, you can paint rooms different colors, hang whatever you like, and light whatever seasonal candles your heart desires.
Buying a home comes with risks, but nowadays many millennials see so many financial difficulties, that they don’t even consider, “can I actually afford a house?” If you based your “yes or no” on how much cash you have on-hand alone, then you are selling yourself short. I was in a similar boat, and with incentives, I was not only be able to buy a home but also renovate it with little to no cash on-hand! Here are the steps that I recommend:
- Check your credit score and make sure you are above 650.
- Make sure you have low credit card debt (if you have a lot, spend the next few months intentionally bringing your debt ratio down!)
- Look at First-Time Homebuyer incentives or programs in your area. A can search for programs on google by searching your state name + First-time homebuyer incentives.
- Have at least 1-years worth of stable income.
- Make sure your loans are low (under 20K, is ideal for someone with a middle-class income).
- If you meet 1-5, then ask your First-Time homebuyer program for a Bank recommendation (pro-tip: You can speed up your application process if you work directly with a bank/lender approved by the First-Time Homebuyer program).
- Get Pre-Approved
- Take Classes on Home Buying/Investments/
- Work with a Real Estate Agent to determine fees, and next steps!
- Search & Find yourself a Home you love!