Millennials prepare to become homeowners!
If you're under 35 years old and hoping to purchase a home in the near future, you're definitely not alone! In fact this last year economists reported only about 2% of millennials were among the home buyers across the U.S.! That's pretty insane considering you are our country's largest generation!
But according to Realtor.com, every study about millennials and housing says the same thing: You believe in homeownership as an investment.
Your debt-to-income ratio will definitely affect your options for a home loan. To qualify for a mortgage, your DTI can be no more than 43%. So your mission needs to be reducing any large student loan, credit card or auto loan balances. And avoid new debts if possible. The ideal DTI is less than 15% of your income.
For millennials who bought a home this last year, the average FICO score was 714 (an FHA mortgage is 682). Unfortunately how credit scores are calculated make it tough for you to qualify. They look at lengthy credit histories — not your consistency in monthly payments like rent, cellphone bills, and utilities. So do what you can to get a score between 650-750. The closer to 750, the lower your interest rates and therefore your mortgage payments.
You've probably heard the ideal down payment is 20%. While it'll certainly get you the best rate for a loan, the average millennial home buyer put down only 7%. So try to shoot for 10% and check out your options. Conforming mortgages only require 3% (if you're a veteran you can qualify at 0%). Ask a real estate agent or lender about local down-payment assistance programs. And of course save as much as you can! You'll not only need a down payment, but an emergency fund so no financial surprises wreck your credit while you are house hunting.
No doubt, Colorado's rental prices are high right now! Since the average renter spends more than 30% of their income on the roof over their head, consider paring down this expense. To prepare to become a home owner, double or triple up on roommates, settle for a smaller place, or spend a season with Mom and Dad.
And if you have questions, feel free to contact me for a no-obligation, consultation and to put together a success strategy to meet your goals.