Summary: Millennials may still continue to struggle to build up the funds needed to make a down payment on a home and secure a mortgage for a home purchase as they continue to work their way up in their careers. But this demographic is increasingly getting into the real estate market. For those who are still finding it tough to get into the market, there are some effective pathways that can be taken, and this article will outline what they are.
Millennials are a huge socio-demographic group of over 83 million people. Many of them want to buy a home but face challenges that their parents did not necessarily have. Homes are more expensive these days, especially in certain centers in Washington State. In most places, home prices rebounded to exceed the pre-2008 economic collapse values. Moreover, home prices continue to go up, making a home purchase even more expensive and difficult to achieve.
The encouraging news is that there is home financing readily available. Further, mortgage interest rates are still reasonable. In fact, rates are hovering near historic lows, making mortgage much more affordable than what they were even a couple of years ago. As of this writing, rates for a 30-year fixed-rate mortgage are sitting at 3.65%, which is a far cry than where they were at the end of 2018 when they were teetering on 5%.
Even still, houses are still expensive, making the greatest investment that most Americans can make of buying a home a real challenge. Paying rent is only helping the landlord get rich and does nothing to help millennials and others build their own wealth. Homeownership is still highly desirable and a part of a wise long-term investment strategy, and luckily, there are some things that millennials can do to achieve that goal.
Here are some tips that millennials can use to become homeowners.
Save For The Down Payment and Build An Excellent Credit History
You’re going to need a down payment to secure a mortgage (unless you qualify for a VA loan), and the higher the down payment amount, the better. A larger down payment will help reduce the amount you have to borrow, which will then lower the amount you owe over the long run. Further, a larger down payment can help increase your chances of getting approved for a mortgage at a lower interest rate, which will help save you money in interest.
The best rates for home loans are for those with an excellent credit history who can put down 20%. The higher your credit score, the lower the rate you may be eligible for. Again, this can be a real money-saver over the life of your loan.
While coming up with a big down payment can be a challenge, it’s possible to borrow the down payment. The problem with this strategy is that the cost of the loan is higher. The mortgage rate may be higher and the lender may require private mortgage insurance (PMI). PMI pays off the loan balance to the lender if you default on the loan; however, it does not protect your equity in the home or any down payment. PMI just adds another monthly expense, but it makes it possible to secure a mortgage where it may otherwise be impossible to do.
Create Non-Location Dependent Income
Home prices are somewhat dependent on the local economy and the employment available in the local area. That’s one of the reasons why certain locations have higher home prices because they are within closer proximity to employment opportunities.
But you may be able to generate non-location dependent income through a “gig” economy by working as a freelancer or telecommuting by working from home. With this income, you will be more free to look for a home in a rural area or an area where the home prices are lower while still being able to make a decent living that’s not dependent on where you live.
Take Advantage Of First-Time Homebuyer Programs
Being a first-time homebuyer can be really tough, especially since you do not have the proceeds of a sale from a previous home to put towards the purchase of a new home purchase. Luckily, however, there may be programs you can take advantage of to help to make buying your first home easier.
Many first-time homebuyer programs are offered by programs of the federal government through the Housing and Urban Development (HUD) and other agencies. Be sure to investigate those possibilities when considering buying a home.
Hunt For A Home In Low-Cost Areas
Certain cities in Washington State are notorious for having high home prices, like Seattle, Bellevue, and Kirkland. But there are plenty of other areas that are still within close proximity to big centers like Seattle that are half the price, such as in Tacoma or Federal Way. Plus, many of these cities are currently experiencing hot housing markets, which means property values are on the rise, giving homebuyers the chance to purchase an affordable home while riding the wave of price appreciation.
Use Sammamish Mortgage’s online systems when searching for a home to compare two things, 1) the median price of homes for each area and 2) the cost of living for each area. The areas with low median prices and that have a lower cost of living are usually easier places to buy a home. If you see something you like, you can get pre-approved all in one spot!
Partner With Others
A homebuying partnership is something many are using to make owning a home more affordable. Multi-generational ownership is used by many families to buy a large home together and share it. Other partnerships can be made among individuals, who are not relatives, to share ownership. Choose ownership partners very carefully and be sure to have competent legal counsel when creating a written ownership agreement.
Home Ownership For Millennials: An Attainable Goal
Millennials are challenged with new obstacles when seeking to buy a home. The strongest challenge is the cost of homeownership, especially when considering the cost of properties in various cities across the state of Washington.
However, there are many clever ways to improve the chances of enjoying an affordable ownership situation. Be patient and do not give up. Work with a REALTOR® who understands the challenges and is an expert in the area where you are thinking about buying and with a trusted home mortgage professional to find the best financing options for your situation.
Want to Apply For a Home Loan in WA State?
Whether you’re a millennial looking to buy your first home in Washington State or have been down this road before, you’ll need help with financing a home purchase. Sammamish Mortgage can help. We are a family-owned and operated Mortgage Company who has been proudly serving the Pacific Northwest for 28 years. We currently lend in all of Washington, Oregon, Idaho, and Colorado and offer many mortgage programs with flexible qualification criteria. Get in touch with Sammamish Mortgage today!