When it comes to home ownership, millennials are no different than other generations. Many would love to buy a home, according to findings by SmartAsset. To achieve that dream, one of the looming issues that must be overcome is saving the down payment. This can be especially challenging in the Boulder-Denver metro area where rents are high. Also, millennials often have student loan payments to pay, which impacts savings.
But record low mortgage interest rates are empowering millennials to invest in a property. To buy a home, millennials need to plan how to overcome obstacles. Here are five tips on how to get organized and make a plan that will succeed, reported by SmartAset.
Do the math
Know the 28/36 rule. Mortgage lenders typically require that your mortgage payment, property taxes and insurance total no more than 28 percent of your monthly gross income. Then, your mortgage payment and your total debt payments, including college loans and credit card debt should not be more than 36 percent of your gross income. Get out your spreadsheet and calculate what this means for you. Knowing your spending limits helps target your search for the right home.
Get your documents together
Getting a loan and closing on a home requires certain documents. Go ahead and pull everything you need together and put it in a file. Usually for a home purchase you need your government issued ID, most up-to-date credit report, a verification form from your employer, W-2 forms, federal tax returns, and bank and asset statements.
Get your down payment together
Plan to pay the biggest down payment you can afford. The down payment amount determines the length of your mortgage and its monthly rate. Typically, the down payment is between three to 20 percent. The bigger your down payment, the lower your loan amount will be. Increasing your down payment has benefits: a higher down payment makes it possible to get a lower loan at a lower interest rate. Putting more money down usually gives you the ability to borrow more.
Consider taxes, property insurance, closing costs and other expenses
These necessary expenses factor into the price of the home you can afford. Be sure to calculate home insurance and property tax rates in Colorado and in the county you are exploring. Closing costs include loan origination, underwriting, appraisal, title insurance, wire and courier and other fees.
Study the area
Discover which neighborhood is best for you. Study the value of surrounding properties. This will help you know if the home you want is comparably priced to other homes in the area. Working with a knowledgeable real estate agent provides insight and perspective on neighborhoods and home values. Be sure to find a real estate agent who can help you navigate the search for a home and purchasing process.
To read the full article, visit smartasset.com/mortgage/millennial-home-buying-guide.
To find a home and realtor for you, visit boulderco.com.