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Create a budget and savings plan

Millennials are willing to stretch their budgets in order to buy a home, with 46% expecting to max it out completely, according to research by Real Estate Witch. Of course, you need to have a budget in the first place before you can push it.

Laying out your monthly income and expenses lets you create clear savings objectives. You’re better able to analyze your spending habits and manage your finances. It’s an easy way to figure out how much you want to save each month to afford a home and adjust your spending to make that a reality,

How to get a free $20 to invest in your future

An app called Acorns automatically rounds up purchases made on your credit or debit card to the nearest dollar and places the excess "change" into a smart investment portfolio. Acorns offers a $20 welcome bonus, immediately from your first investment.

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Improve your credit score

Credit scores are meant to measure how good you are at managing debt. It’s a number between 300-850, and the higher your score, the better you supposedly are at handling the money you owe. You’ll also often get a better mortgage rate from lenders if your score is higher.

Generally, you need a score of 620 to qualify for a mortgage, although some programs may offer you one if your score is lower.

According to Experian, the average score for millennials was 687 in 2022.

That’s not bad, but when you’re concerned about your ability to make a downpayment and keep up payments in general, you want the best mortgage rate possible.

The greatest factor contributing to your credit score is your payment history — making up about 35% of the total.

The best way to maintain a healthy payment history is to use your credit card, but keep your balances low and pay off any debts you have on time. This demonstrates that you take debt seriously and always manage to pay off any you’ve got.

Having a mixture of loans is also recommended to show how you can manage debt. For instance, student and car loans combined with credit card debt show how you manage multiple payments.

Having a longer credit history also looks good in the eyes of lenders and can improve your credit score. Keeping a single credit card, but having it for a long time, is better than having multiple cards. This is because it shows you’ve learned to manage your debt and have a proven track record of paying things off.

Consider alternative down payment options

Looking to alternative down payment options can help make this process easier on you — and your wallet.

For instance, a Federal Housing Administration loan requires only a downpayment of 3.5% for homebuyers.

If you’re looking to move to a rural area, you might qualify for a U.S. Department of Agriculture loan that doesn’t require a downpayment at all.

Similarly, a loan through the U.S. Department of Veterans Affairs doesn’t need a downpayment — though this might be a requirement in some cases.

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About the Author

James Battiston

James Battiston

Staff Reporter

James Battiston has been writing personal finance articles for various websites for the past four years. He has a background in film and TV production, and can often be found consuming far too much coffee.

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Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.