Becoming a homeowner might seem like a distant dream if you’re in your 20’s. Maybe you have student loan debt and you have an entry level salary. However, achieving homeownership as a young millennial is not only possible but also a great goal to go after.
When you’re renting, you are paying your landlord’s mortgage, and once you’ve moved out, you don’t have anything to show for those payments. When you own a home and make those same payments, that money is going toward home equity that benefits you. Buying a house early means you’re starting your payments early making it likely you’ll have built quite a bit of equity by the time you’re in your 30s, and there are lots of benefits to having home equity.
Owning a home rather than renting gives you a consistent payment so you no longer need to worry about rent raises. It also provides the kind of stability you don’t get with a landlord who could kick you out at the end of your lease.
When you own a home, you get to be in charge. You choose how it’s painted, how it’s upgraded and renovated, and if you have pets. As the homeowner, you have control over everything about the house which means you can make it your own and say goodbye to worrying about what’s allowed or not.
So where do you even start? Here are a few key steps to buying a house to get you started.
One of the first things you’ll want to consider if you’re thinking about becoming a homeowner is making a down payment. It’s a good idea to start saving for a down payment as soon as possible so you put down as much as possible.
Lenders will want to make sure you have a good credit score before they offer you a loan. Your credit score is a number that represents your creditworthiness, and lenders look at this number to determine if you have a demonstrated ability to pay your debts. It’s a good idea to find out what your score looks like. If you find yourself with a low credit score, there are steps you can take to build it up.
Getting preapproved before you start the home search is an important step to homeownership that you don’t want to skip. Preapproval means that a lender has reviewed your financial information. This includes items such as your credit report, tax returns and bank statements. They will provide you with a letter of preapproval that states the loan amount you qualify for. When it’s time to make an offer on a house, being preapproved can give you a leg up on the competition. So be sure to contact us to learn more about getting preapproved.
Having student loans doesn’t automatically disqualify you from obtaining a mortgage. Mortgage lenders aren’t so concerned with whether or not you have those loans because what they actually care about is your debt-to-income (DTI) ratio. Your DTI ratio is a metric that gives lenders an idea about if you have the ability to pay your monthly mortgage payments. It’s a calculation of how much of your gross monthly income goes toward your current debt. The less debt you have compared to your income, the better ability you have to pay your mortgage. So, having student loans itself is not a barrier to homeownership as long as you can show you can handle a mortgage payment too.
When you’re a first-time homebuyer you don’t have to find the home you’ll spend the rest of your life in. Set your sights on something affordable and remember that it’s called a starter home for a reason.
As a first-time homebuyer, it’s so helpful to have an experienced mortgage professional explain how home buying works, answer all of your questions, and ultimately guide you through a smooth and stress-free mortgage process. Our Loan Originators are knowledgeable, and they care about providing wonderful experiences for all their borrowers. Not only can they demystify the mortgage process, but they can also make suggestions and offer insight on every other aspect of homebuying. Contact us today to speak to a licensed professional who is waiting to answer any questions you have.
Homestead Funding offers exceptional customer service and a convenient mortgage process. Whatever your financing needs, our goal is to exceed your expectations.