Millennials may be slower to become homeowners compared to older generations, partly due to student loan debt and the higher cost of living in some areas. However, owning a home shouldn’t be a dream out of reach. Learn how you can become homeowners quicker in this RealEstate.com article by Casey Fleming.
According to a recent Pew Research Center report, millennials, as compared to previous generations at the same time in their lives, are significantly less likely to own their own homes. In 1982, for instance, 41 percent of boomer households owned their homes, and, in 1999, 40 percent of Generation Xers owned their homes. In 2016, however, only 35 percent of millennials owned their own homes.
We know that student loan debt, a tougher job market and a lower savings rate (you only live once, right?) have contributed to the problem and may make some millennials feel hopeless about owning their own homes. But it doesn’t have to be so.
First, you should know that buying a home for the first time has ALWAYS been hard. You may think that your parents had it easy when they bought their first home, which cost one-fourth of what homes cost today. But remember: Wages were much lower and interest rates were much higher then. The monthly cost of owning one’s first home has always been higher than renting, thus the dilemma. To buy your first home, you’ll need to make some sacrifices. But once you do, moving up is much easier.
The two most common barriers to buying are a lack of cash for a down payment and high debt load. If this describes you, keep reading.
Meet With a Super-Smart Mortgage Advisor
Depending on your circumstances and the price range of the home you want to buy, you may need to increase your income, reduce your overall debt, reduce your monthly debt obligations, improve your credit or save more cash. Every prospective homeowner is different, so the right way to prepare to buy your first home depends on your situation. To know for sure, you must meet with a good mortgage advisor to get a clear baseline from which to work.
Reduce Your Monthly Debt Obligations
If this is what bugs you most, you have several solutions available:
- Refinance your debt into other debt with lower monthly payments. This could work well with student loans, car loans and credit card debt in particular, but be aware that if the interest rate is not better than what you already have, the lifetime cost of the financing increases by doing this.
- Pay down your debt fast. This may require cutting way back on unnecessary expenses (Do you really need to eat dinners out?) or increasing cash flow by getting a roommate or downsizing your apartment. Be sure to calculate which debts have the highest payment-to-balance ratio and pay those off first to increase your ability to qualify more quickly.
- Sell assets to pay off debt. Do you really need that Harley? Do you need it more than you need to get into your first home? Sell any asset that has a debt attached to it first, and then look around to see if there’s anything else you can live without.