Studies show that as of the first quarter of 2021, 38.1 percent is the homeownership rate of Americans under 35 years old. The number shows that younger adult Americans are much less likely to be homeowners because not many have enough money saved up for down payments. Millennials and Gen Z also don’t have enough to spare for long-term payments since not everyone has paid off their student loans. These facts may seem discouraging, but the truth is that there are plenty of ways to get around the reality of the situation with enough drive and discipline.
If you and your partner are on the younger side and thinking of buying your first home together, here are some tips to get you started.
Pinterest is good for finding design inspirations for your home, but not if you’re on a limited budget. One of the best things you and your partner can do while preparing to buy a home is to manage your expectations because you’re just starting, and it’s OK not to have every item on your home wish list just yet. Draft a home wish list that’s more in line with your budget and what you can afford at this stage of your life. One way of doing this is by categorizing your needs and wants, also known as non-negotiable and negotiable features. A list of negotiable features include:
- Proximity to your place of work
- Pets are allowed, especially if you and your partner are pet owners or planning on having one
- How many bedrooms and bathrooms
Examples of negotiable features can include:
- A lot of natural light
- Swimming pool
- And other types of luxuries that you can do away with
Establishing what you can and can afford to splurge on right now will help you and your partner streamline your choices and will help you find a home that you can pay for in the years to come.
Find the right agent and loan officer
While you can (and must!) certainly do your own research thanks to the availability of various real estate platforms out there, you would also benefit greatly from finding the right agent. The right real estate agent will have more resources to help you find the home that suits your needs the best. The right loan officer can help you answer your questions regarding the financial aspect of buying a home and everything you need to know about how mortgages and home loans work. You need all the guidance you can get, especially if this is the first time for both you and your partner. But don’t neglect to do your own research as well!
Establish a good credit score
If you and your partner don’t have any credit yet, now is the time to establish a good one. You can do this by applying for a credit card or two and only use it for necessities like bills or emergencies—and don’t forget to pay the cards on time. A high credit score is one of the first things lenders look at, and it can help qualify you for a mortgage with much lower interest rates.
Eliminate debt, slowly but surely
If you and your partner still have student loans, paying them off should be at the top of your financial priority list. This is because any outstanding debt you have will be counted against the funds you will be allowed to borrow for your home. Lenders will also look at your debt ratio or your debt to assets proportion, and a high one may disqualify you and your partner for a home loan.
Save some for additional costs
Once you have the funds for the down payment, don’t forget to set aside at least $10,000 for additional costs like moving-in expenses and other transactions like title insurance and maintenance. These little things may seem just that—little—but when they accumulate, they can make up for a big amount that you and your partner may not be ready for. Ensure you have an extra budget that you can use as a buffer for all these additional and unexpected expenses.
Not Your Forever Home
One of the things that can help you and your partner make peace with a simpler home, for now, is the hope that this will not be your forever home, and you can purchase a bigger and better one later. You are both young and just starting, and with each other’s support, you can reach your dreams and financial goals and build something of value together.