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,
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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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