How to Buy a House as a First Time Buyer (Tips for Millennials)

By Kristen Kish

|10 min read
 how to buy a house as a first time buyer

Buying a house as a first time buyer can be exhilarating. It can also be hard, exhausting, and yet, extremely rewarding. As a millennial, knowing that you own the roof over your head gives you a great sense of pride. At a certain age, people tend to settle down and make the biggest financial decision of their lives to buy their first home. Many younger millennials buying homes need to start venturing out into the housing market.

Millennials are dealing with a harsher economy and higher cost of living than the generations before them. Despite that, millennials make up for the largest portion of the new home buyer’s pool. Part of it is simply the desire to settle down early, and partly because millennials are, by necessity, becoming more prudent spenders. They understand that loan money is dead money. With the right approach, the amount of money they are paying for rent might go towards paying the mortgage on their own home.

Most millenials have never owned their own home before. They’ve either been renting apartments or renting houses, dumping all their earnings into rent. The average millennial does not know how to buy a house as a first time buyer. In this article, we’re going to cover everything you need to know in order to buy a house as a first time buyer, particularly if you identify as a millennial.

How to Buy a House as a First Time Buyer (7 Steps)

1. Boost Your Credit Score

Start worrying about your credit score as early as you can. If you exclude the student loan, it’s much easier to build a better credit score as a student and part-time worker. A good credit score will help you land a good mortgage deal. Younger millennials considering buying homes might not be making a lot of money at the current stage of their career. If you combine that with a bad credit score, your options will be severely limited.

Some good habits to maintain a healthy credit score include paying your debts well in time. For millennials buying homes, not letting debts exceed 25% of your credit limit, is reccomended.

2. Clear Your Debts

Millennials saw some of the worst times when it comes to education-related expenses. Student loans make up for a major chunk of millennial debt. This debt not only brings down the credit score, marking them as unsafe borrowers, but it also makes it hard for them to work towards paying two debts at once. The student loan and the mortgage.

This is why millennials should first work towards paying off their outstanding debts, whether it’s a student loan, credit card debt, or automotive loans. This may take more time, but it will be worth it. Paying off your house, along with paying your other significant debt is not very feasible.

3. Cut Expenses and Save Before You Buy a House

It is possible to buy a house and secure a mortgage with a down payment as low as 3.5%, but it will cost a lot more in the long term. And buying a new house and moving in costs way more than a simple down payment. Therefore, the more you save, the easier buying your first house will be. A millennial looking to buy a house should start with cutting expenses and saving.

The most significant expense millennials can cut is the rent. By moving in with your parents, a relative, or a friend, you will be able to save that amount. Your aim should be to save at least double the amount needed for a 20% down payment on your new home. So for a $200,000 house, your goal should be somewhere in the $80,000 zone.

With a 20% down payment, you will be exempted from private mortgage insurance.
With the other $40,000, you will be able to cover the new home expenses. They include moving, repairing, realtor fees, etc. The more you have saved up, the better your options will be.

4. Consider Taking a Loan from Family or Friend

If you have the option, ask for help when you need it. You can take a loan from a family member or a friend, especially for the down payment on the new home. You probably won’t have to pay interest, and with softer loan return terms, you might easily manage to pay it back along with your mortgage payments.

5. Consider Your Housing Options

Owning a home and owning “the” home are two very different things. If better finances and getting rid of rent are your core aims, then you should approach the housing market solely from a cost perspective. This might also be the time to consider your housing options. Rather than buying a house, millennials buying homes may opt for an apartment, condo, or a manufactured home- the least expensive option.

This decision should be made with the long term goals in mind. Whether you plan to live alone or have a family. What will your property be worth in a decade? Will you be staying there for several years, or are you planning to move abroad in a decade? These kinds of questions can give you a broader perspective while you are making the biggest financial decision of your life.

6. Do Your Research

If you are opting for a realtor, do your research about finding the top realtor according to your requirements. Go through comments, read reviews, compare commission rates, area specialty, and reach out to previous clients if you can. A good realtor can be the difference between an exciting new home and a hateful new property.
As millennials are better adept at technology, you should employ the power of the internet. Carry out as much research as you can about properties on your own. The more data you have, the more informed decision you will make. But don’t rush it. Since millennials buying homes are plagued with the instant-result mindset, it can be hard to take your time. But buying a home cannot and shouldn’t be rushed.

7. Pick a Property Well Inside Your Range

If you are pre-approved for a mortgage and you managed to get a really sweet deal, you might overreach and buy your dream property, instead of simply buying the feasible one. But the charm will wear off soon enough when you start expanding way over your budget. To play it safe, pick a property well under your budget and estimation. Like if you planned and saved for a $200,000 property, play it safe and choose the one that costs around $180,000.

 how to buy a house as a first time buyer

How Millennials Can Buy a House as a First Time Buyer

Millennial home buyers might face more difficulties in buying their new homes, but it’s not impossible. With some serious cutbacks, savings, and excellent financial management, you will be buying your first house in just a few years. But the key is to start working on it as soon as you can and to find agents that will help you along the way.

Kristen Kish

[email protected]

Kristen is the Content Marketing Manager for FastExpert Inc. She has been writing professionally for 4 years and knows the Real Estate market like the back of her hand. She's obsessed with dogs and all things Disney related.

One response to “How to Buy a House as a First Time Buyer (Tips for Millennials)

  1. My sister wants to buy a home so that she can start a family with her boyfriend in two years’ time. Thanks for telling me that she should decide with her long-term goals in mind. Once she’s decided what she wants to do, I think I’ll tell her to hire a real estate service to make sure that she’ll get what she wants.

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