With student debt and a proclivity to switch jobs, many millennials aspiring to be homeowners face financial and practical challenges. Buying a home isn’t a process you should jump into unprepared. If buying a home is your goal, you can make it possible with the right preparation. Here are five tips that will get you ready to buy your dream home:
1. Work on Your Credit Score
A credit score of 580 is generally the minimum it takes to qualify for home loans, but it makes more sense for your credit score to be at least 680 when you start the homebuying process. By using a service like Experian or Credit Karma, you can view your credit score and see what it will take to raise it. The higher your credit score, the better mortgage rate you can get on a home. Taking the time to fix your score can save you a lot of money in the long run.
2. Determine Your Budget
A lot goes into determining your home buying budget. (Hint: more than just checking your bank account). Consider the price of your ideal home, but also factor in moving and living expenses you anticipate, including transportation, home improvement costs, cleaning service and furniture. Even with these costs factored in, avoid spending at your max when you buy a home. It’s a huge step that makes having a safety net more important than ever.
3. Pick the Best Mortgage for Your Needs
What’s your purpose in buying a home? Are you selecting the one of your dreams, or are you a first-time homebuyer looking to make the smallest payments possible? Some mortgages allow you to pay low monthly rates for your home, while others help you gain more home equity by saving cash on high interest rates. If you’re wondering, “ Who has the best mortgage rate in Canada ,” you can compare them online, but the best option comes down to what suits your specific needs.
4. Build Home Equity
Home equity is the amount you own of your home, which makes it part of your net worth. Some mortgage packages allow you to build home equity faster, with shorter timelines and higher payment amounts. Building home equity is a great goal for millennials, who may be paying off student loans and want to minimize the amount of debt they take on.
5. Learn About the Housing Market
Timing matters for home buying. Part of your preparation is studying the housing market where you want to buy a home, so you can understand its timing. That way, you can buy when demand is lower and the market favors buyers. It’s best to avoid rushing and instead wait to buy your home so that you can take advantage of every opportunity to bring down the price.
Getting Ready to Buy Your First Home
Buying a home is one of the biggest, if not the biggest, purchases you’ll ever make in life. Preparation is key to avoiding mistakes. Remember, the goal isn’t just to buy a home, but to do so without putting you in financial risk. When done right, investing in a home can serve as an asset that increases your net worth and your financial security.
