Studies show that millennials in the United States may finally gain a foothold in homeownership, but challenges may continue to arise. Even still, with the right financial practices and strategic choices, young couples or newlyweds might be able to become first-time homeowners even during these unprecedented times. If you and your partner are thinking of buying your first home, here are some key financial tips to help you get started.
Establish a good credit
The best time to build up a good credit score was yesterday. If you and your partner own a credit card or two, ensure that you continue to practice excellent credit management by only using your cards for utilities, emergencies and making a habit of paying them on time. A high credit score can help you and your partner qualify for a low-interest rate when you purchase your first home.
Pay off any outstanding debt now
When purchasing your own home, you need to know that any outstanding debt you have will be counted and used against the amount you will be allowed to borrow. Lenders will look into your debt ratio, which is the proportion of your debt to assets. If that ratio is high, you may not qualify for a home loan.
Save a certain amount for other costs
Often, couples get sidetracked by the number of side expenses they have to shell out when buying a home. This includes factors like move-in and transaction costs, as well as minor things that always come with buying a house: taxes, utilities, moving costs, furniture, maintenance, and title insurance. Save at least $10,000 or more as a cushion when buying your own home.
Be strategic about your saving accounts
Some banks offer more high-yield interest rates than others. As a general rule, online banks often have a higher yield compared to your average American bank. Open an account where you and your partner can keep your funds accessible and liquid—even a traditional savings account can do the trick. Even if you’re not buying a home anytime soon, say, in the next three years or so, you never know when your dream house and land will suddenly catch your eye, and you want to be ready when that time comes.
Split a paycheck
The best part of being 1/2 of a couple is that you can split a paycheck if you can afford it and save the other on your dream home. You can keep things organized by categorizing your living expenses into three: livable, survival, and comfortable. Your expenses for the survival category involve the bare essentials for day-to-day living: food, insurance, clothing, utilities, and minimum credit card payments. The second paycheck can then go to the other expenses you might encounter as you go on your home-buying journey.
Exhaust government assistance
Check the website of the Department of Housing and Urban Development (HUD) to see if home-buying programs are available in your state and apply for that loan or program. One example of this is the Dream Ownership Program in Georgia, which gives $7,500 to essential service employees as down payment assistance. Exhaust all these resources and check if you qualify for any of them.
Make a budget and be consistent
Budgeting is simply the discipline of setting limits on your spending and allocating your resources to help you achieve your financial goals. You can listen to all the podcasts, read all the articles, or even go to a financial adviser, but at the end of the day, no budget plan or program will work if you don’t stick with it. Sit down with your partner and discuss what budgeting strategies work for you and what don’t, and know that you have specific day-to-day needs and personalities, and you can tailor your budget according to those factors. No matter what plan you come up with, make sure to follow through and stick with it.
Consider if marriage will make homeownership easier
If you and your partner are not yet married, consider if your state makes it easier for married couples to purchase their own home. This may vary from state to state, so make sure that you research your state’s laws and guidelines regarding homeownership for couples.
Homeownership will come when we practice good budgeting and do our due diligence. Having a high credit score, investing in the right things, and planning for the long haul can also aid your homebuying journey. Be smart about your resources, and you and your partner might step into your dream home earlier than you expect.