3 Tips to Help Millennials Buy a Home

By July 13, 2017Mortgage 101

Millennials. The independent generation. The generation who likes urban neighborhoods with a little bit of edge and wings tossed in truffle oil.

You spread your wings during the Great Recession and, as such, you’ve been dubbed the renter generation. Because you face a very different financial world than your predecessors.

It’s not uncommon for your eco-friendly mindset to only be matched by your staggering student loans. Does this mean you actually want to keep renting for the rest of your life?

Probably not.

You probably don’t want to keep being a slave to the rental market, especially in the Seattle area where rental rates are ridiculous! How then, with massive student loans and a generally smaller salary, are you supposed to compete with Gen Xers and baby boomers?

  1. Tackle Your Student Loans Now

Your debt-to-income (DTI) ratio is one of the biggest factors in determining the size of mortgage for which you will be approved. The bigger your student loan payments, the higher your DTI.

By paying off your student loans, you can lower your DTI and increase the amount of home you can afford.

Another factor to consider is the overall cost of your student loans. Paying the minimum each month might give you more money for vacations and dinners out. Unfortunately, it also means the overall cost of your loan will also be more.

The Strategy: Take a close look at your monthly expenses and establish a savings goal. How much, above and beyond your monthly minimum payment, can you reasonably afford to save?

Apply a portion (aim for 50% or more) of this sum to your principle. The faster you pay off the principle, the less you’ll pay in interest.


  1. Amass Your Down Payment

Ideally, you’ll want to have 20% of the purchase price saved for your down payment. This will allow you to avoid the added homeowner’s expense of private mortgage insurance.

For a $400,000 house, 20% would be $80,000.

The Strategy: Don’t let the large figure deter you. Like any great achievement, your down payment won’t be amassed overnight. The key is to get started as early as possible.

Open a separate savings account. (Ally is a great option. It offers an 1.15% interest rate.) Whatever is leftover from your student loan payments, deposit it in your new account.

Extra Tip: Make some spare cash on the side to boost your savings. Whether it’s selling items you no longer use or refereeing a youth soccer league, a couple extra hundred dollars each month can add up.


  1. Give Your Credit a Boost

Your credit score is another major factor a lender uses to determine the size of mortgage for which you qualify and the interest rate you can secure. This three-digit number is determined by your credit history. Start improving your credit history immediately to boost your credit score.

The Strategy: Pay all of your bills on time and in full. This is the single biggest way to boost your credit score.

Give me a ring or email today, or drop by my office to find out where you stand financially and get started on the path to homeownership.

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