Young Professionals First-time Home Purchase Plan
Young professionals who are buying their first home face many challenges in our current market, primarily higher student loan debt. A Bankrate study showed that 61% of Millennials do not yet own a home, and almost 25% of them nailed student loan debt as the reason. While debt from going to college does not automatically disqualify homebuyers from obtaining a loan, it does make saving for a down payment more difficult as well as pushing the debt-to-income ratio higher. These are two vital factors in a lender’s approval process for a mortgage.
Millennials should not be scared off, though. Buying a home is absolutely within reach with just a bit of discipline and planning. If buying your first home is a goal in the next couple of years, here are some steps to take in ensuring you are credit-ready.
1. Lower your debt-to-income ratio. DIT is one of the first things a lender will consider. Lowering your debt, even by the slightest margin, can help earn that approval:
Pay down any debts possible by using tax refunds, bonuses, or any extra funds.
Increase income by asking for a raise or doing freelance work or adding a side gig.
Consolidate or refinance your student loans to reduce interest rates and payments.
Enroll in an income-based repayment plan to reduce student loan payments to match your current income better.
2. Improve your credit score. Also a significant factor in obtaining a mortgage, the credit score is an essential piece of the mortgage puzzle. Earning a higher score and keeping it there helps up your possibilities of being approved as well as affects what type of loan you qualify for.
While you don’t need to open any new lines of credit, keeping current lines open with low to zero balances can help toward increasing your credit score.
Check your credit report and report any inaccuracies that may be counting against you.
Pay your bills on time, every time.
Although Millennials face several challenges in purchasing their first home, these tips are a great way to start planning for the future. Going to school and earning a degree does not mean young professionals have to miss out on home ownership.
If you or someone you know if looking to buy a home for the first time, contact Team Clancy. We’ve been helping home buyers in the Richland, Gull Lake, and Greater Kalamazoo area buy homes since 1988.
(269) 629-4186 | Info@TeamClancy.com