Home Buying Tips for Millennials
Post-Recession Home Buying Tips
Home buying tips can change along with our economy. As the so-called Great Recession falls further and further in our rearview mirror real estate has returned. This recovery has been gradual rather than “spiking” and the home equity that was lost post-2008 has returned. Homeowners are now able to sell their homes as equity has returned while at the same time interest rates have still remained relatively low. If you’re a millennial and are still renting, you should seriously start thinking about owning instead of paying your landlord’s mortgage each month in the form of rent. If you’re exploring the option of buying, here are five tips you should use:
Home Buying Tip #1:
Do you want to own? When you own real estate and the property increases in value over time, that equity belongs to you. Simply put, if you buy something at $10.00 and three years later it’s worth $20.00, that increase in value belongs to you and real estate is certainly no different. But beyond the financial considerations, do you want to own or are you more comfortable renting? When you rent, you can change your mind where you want to live as the lease comes up for renewal. The financial rewards are there when you own but you need to be comfortable with your own decision.
Home Buying Tip #2:
Get preapproved. This term means you’ve filled out a loan application with a mortgage company and provided some basic information regarding your employment, income and assets. A loan officer can tell you how much you can qualify for based upon your gross monthly income and current market rates. The loan officer will also pull a credit report and request credit scores. Once the loan officer reviews this information you will receive your preapproval letter. All you need to do now is find a property. When making an offer on a home, most real estate agents won’t seriously consider your offer if you’ve ever even spoken with a mortgage company.
Home Buying Tip #3:
Gather your documentation. When you first speak with a loan officer you’ll be asked to provide quite a bit of documentation so here’s a heads-up on what you can expect. A loan officer will ask for your most recent paycheck stubs covering a 30 day period. You’ll also need to dig up your two most recent W2 forms along with recent bank statements showing you have sufficient funds to close. If you’re self-employed you can expect to provide your two most recent federal income tax returns along with a year-to-date profit and loss statement. Get the contact information for your insurance agent as well.
Home Buying Tip #4:
Do the math. As part of the preapproval process, your loan officer will tell you how much you could borrow. In addition, you’ll be provided with a form called the Cost Estimate which will highlight the various fees you can expect at the settlement table along with how much cash you’ll need to close the deal. Your loan officer will ask for bank or investment statements of accounts you own showing there are enough funds for a down payment and closing costs.
Home Buying Tip #5:
Use an agent. Don’t fly solo here. Real estate agents that help you find a home-based upon your requirements and negotiate on your behalf cost you absolutely nothing as the sellers pay the real estate agent commissions, not you. If there is any cost here, it’s the price you will pay if you don’t use an experienced real estate agent.
Taking charge of these home buying tips can help you get approved fast when it’s time to make an offer.