First, your brother did it, and then your colleague from work. And this past weekend, your best friend decided to take the plunge.
So maybe it’s time for you to do it, too. Because this year, one-third of all homebuyers will be Millennials.
We get it; you’re swamped with student loans and building your professional career. So maybe buying a home hasn’t been at the top of your to-do list.
And frankly, buying a home is a big step – at any age. It’s exciting, but can also be a bit overwhelming. Renting is easy. No yard work or maintenance, close to everything, maybe even an awesome gym, pool and coffee bar. Aside from the occasional roommate issue, what’s not to love?
So how then do you get to the next step in adulting? Most Millennials see themselves as eventually settled down, but the road map to get there is a bit fuzzy.
Consider this: No one is an expert about something they’ve never done before. And it’s okay – even cool – to ask questions. We’ll help you get started.
First, there’s a ton of financial reasons to own a home. You build equity each month, so basically you are paying yourself instead of a landlord. At tax time, you can deduct mortgage interest, property tax and some closing costs. And if you stay in a home more than two years, you are exempt from paying capital gains tax on any profit (up to $250,000) that you make when you sell it.
And there’s the part about the American Dream. There’s a pride of owning your own home. And you get to choose where you live, how you want to paint, decorate and socialize. And never worry again about the size of your dog.
Is homeownership attainable?
“While it’s more difficult to buy a home than in years past, homeownership is still highly attainable,” said Chris Cope, president, Allen Tate Mortgage.
Borrowers with a decent credit score and steady income can qualify for loan programs with a minimum of 3 percent down.
“Many first-time homebuyers have unrealistic expectations of how much money they need, or how the process works. It’s never too early to have a conversation. By doing so will give you time and a plan to get your finances in order if you’re not quite ready to buy,” said Cope.
What can I expect?
One of the first steps in buying a home is to get pre-approved for a mortgage.
“This is a comprehensive review of your finances that will help determine your readiness to purchase a home. While it’s much more detailed than a pre-qualification, it will better position you to make an offer when you find the home you want,” said Cope. “In today’s low inventory market, pre-approval gives you a distinct advantage.”
Millennials are also likely to conduct their own home search online, weeks or even months before they are ready to buy. And while that’s fine, you need to engage a Realtor® when it’s time to get serious. A Realtor will guide you through the process, serve as your trusted advisor and help you negotiate a successful offer. And many first-time buyers don’t realize that a Realtor does not get paid until you close on a home.
What are my loan options?
Mortgage options and requirements vary greatly from person to person. However, most first-time buyers opt for a Federal Housing Administration (FHA) loan or a conventional loan offered by the Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac).
Generally, FHA requires a minimum down payment of 3.5 percent and a lower credit score than a conventional loan. FHA also may allow a higher debt-to-income ratio. However, FHA loans carry a Mortgage Insurance Premium (MIP) that is paid upfront and monthly as part of the total loan.
Fannie Mae and Freddie Mac offer conventional loan programs with as little at 3 percent down, but require a higher credit score than FHA. Fannie and Freddie loans typically have a lower debt-to-income ratio. They also require Private Mortgage Insurance (PMI) if the buyer has a down payment of less than 20 percent, but do not charge an upfront fee.
Who can help me?
At Allen Tate Mortgage, we have a team of mortgage consultants who are Millennials themselves – and are ready to help. Whether you are married, starting a family (or adding to one) or happily single, we can identify with your needs, desires and challenges – and help celebrate when you achieve the milestone of homeownership.
NMLS#1433719 Loans available in NC and SC.