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Are you a Millennial who thinks homeownership is out of reach?

Born between 1981 and 1996, millennials are the largest living generation with a population of 72.1 million in 2010. A generational shift is happening in home buying as millennials begin to purchase residential real estate. Having grown up in the smartphone and internet era, technology plays a large role in how millennials search for properties. During the Covid pandemic, as home showings moved online, higher-earning millennials were among those buying. The average millennial's annual salary is $47,034 with a net worth of about $8,000. Higher earning, college-educated millennials tend to also have student loan debt which can affect their purchasing power as lenders consider the debt-to-income ratio. However, these are not impervious barriers and homeownership is more realistic than many millennials may think—especially since this group takes finances seriously. Getting your financial house in order is a critical foundation for you to buy an actual house. Five “must-do’s” before buying a house Set a goal Some people are very, very lucky and inherit a house or are given one as a gift. For the rest of us, we need a plan. An effective plan looks different for different people so you need to evaluate your situation and decide what might work best for you. The tips in this list are a good start so consider what you can do today to begin moving closer to your goal of homeownership.

Budgeting Prioritizing expenses is critical, especially if you live paycheck to paycheck and don’t have much wiggle room. Try to figure out if there are any areas where you can cut costs. Monthly subscriptions like Spotify and Hulu are a great start because they can add up. So do those Starbucks runs and eating out. Find ways to reduce your monthly expenses without feeling like you are deprived. Consider making your own coffee at home. Learning how to cook for yourself is a great way to save money and learn valuable new skills! If you have a debt to pay down, try to include your debt reduction plan in your budget so you still have room to save money. Save, Save, Save If you have a realistic and balanced budget, you should be able to start saving money. Save everything you can and if possible, find side gigs to make more money and put that in savings as well. The quicker you get your down payment saved up, the sooner you can stop paying rent and start investing in your house. Shiny Credit Score It may sound cliché but having a good credit score is the holy grail of getting approved for a home loan. You need a good credit score to be an attractive borrower for a lender.

Paying your bills on time and having a balanced debt-to-income ratio (DTI) are key to building a good credit score. A DTI of 43% is the highest ratio a borrower can have and still qualify for a mortgage, but lenders generally seek lower ratios closer to 36%. Most lenders prefer to lend money to borrowers with credit scores that are well above the 620 minimum. Having a high credit score can help you get lower interest rates with smaller down payment requirements.

Investing Building your net worth is one of the most important things you can do as a Millennial. Don’t wait to start saving money. Save everything you can and start investing now. If your employer offers a 401(k) or similar retirement savings plan, do it. It may be tempting to seek investment advice from your parents or friends—and it’s always good to talk to them for a gut check—but an unbiased financial advisor will be better equipped to tailor their guidance to your specific situation. ---------------------------------------------------------------------------------------------------------------

Are you a first-time home buyer looking for help in the Sacramento, Placerville, or Yolo area? We're happy to answer any questions about the home buying process, no matter how large or small. Drop us a note today!

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