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Financial Tips for First Time Home Buyers in the 21st Century

Luxury Homes In El Paso

Financial Tips for First Time Home Buyers in the 21st Century

a happy first time home buyer with her pet catWe’ve all heard the saying that millennials won’t be buying homes anytime soon, or more importantly: can’t afford to buy homes. With inflation, a harsh job market, and more and more young couples and families struggling financially, the saying isn’t necessarily false. However, even with the economics of today being as difficult as they are, millennials recognize the value in buying a home in terms of security, family, and “adulting.” So what can millennials do to ensure they’re in a good place when the time comes to buy their first house? These financial tips can help!

Tip #1: Handling Your Budget

Every adult, whether elderly or trying out adulting for the first, will tell you the same thing: you gotta budget. You gotta. There’s no way around it, no matter how much you want this to not be true. With online shopping, movie, TV, music, and audiobook streaming apps, and the insatiable need to buy all the pets in the world, saving money can be rather difficult. Not to mention more serious issues like crushing student debt rates, high costs for health insurance and medical care, and having to pay bills monthly that can prevent anyone from properly saving. Here are a few things you can do:

First, think about known big expenses coming up: grad school tuition, a new car, moving out of your parent’s home, etc. How much do you estimate you’ll need and how much, if anything, do you have right now? Knowing what big expenses are coming up within the next five years or so—for the ones that can be expected at least—can help you better prepare and manage your money.

Second, take a look at your spending habits. How much do you spend on food, gas, and bills a month? For one month, analyze your spending. What things did you spend the most on? What stuff came up unexpectedly that could skew your monthly spending average? Understanding your habits is a great step to getting your finances under control.

Third, estimate how your monthly costs will change if you are a) moving out of your parents’ house for the first time or b) moving from a cheap apartment to somewhere that will require you to pay much more a month (such as buying a home and having to pay the mortgage monthly). The latter may seem farfetched depending on where you’re at in your life, but managing your finances early can better prepare you for the future.

Once you’ve done this, you can see what your finances are like now, what they will look like in the near future, and what you can and can’t afford based on your income. If you’re worried about finances, there are many things you can do to save, such as cutting back on your “going out” fund, selling your vehicle (if you live in an area with reliable transportation and pay high monthly bills for your car), and making more money by working a side job. It’s also important to note that while you may have the money, it doesn’t necessarily mean you should spend it all. It’s a good idea to either save or pay off any debts that you may have. Not only will this help you financially, but it’ll also help to improve your credit score, which is essential for first time home buyers.

Tip #2: Thinking Like a Home Buyer

There are many things you have to do in order to purchase a home and you’ll have a lot of important stuff to consider as well. You’re going to want a home that you can picture yourself living in for a long time, one that will accommodate your needs, your growing family, and everything in between. Many people buy a home that begins as their starter home before purchasing their forever home. Other people go straight for their forever home. This will all depend on you, your (potential) family, and your finances. These tips can help:

Start working on your credit score early. This will be an important factor for many big purchases in your life and you want to be sure it’ll be good enough so you can purchase what you want or need in the future.

Save ahead of time for the down payment and closing costs. These costs usually catch first time home buyers by surprise but saving in advance can alleviate any problems with purchasing the home of your choice.

The saving doesn’t stop there. You’ll want to have some cushion for after you move in, because you never know what kind of unexpected costs may creep up once you do.

Avoid opening new credit accounts right around the time you’re applying to be pre-approved for a home. Typically, your credit score will drop a little when you open new accounts, which can affect whether or not you’re pre-approved. Wait to do this after you’ve been approved.

Plan ahead. You’ll want to be sure you’re choosing a property that fits your needs. Be sure to check out the neighborhood and the nearby schools, parks, stores, and restaurants. You don’t want to live anywhere where you won’t have access to the things you need nearby.

When it comes to thinking like a home buyer, the best thing you can do is plan ahead, especially financially. That way, moving into the home of your dreams can become a reality instead of just staying a pipe dream.

Tip #3: Financially Handling the “Millennial Stigma”

Some people say the millennial housing crisis is at the fault of millennials themselves, because they don’t save, they spend money on “wasteful” things—like avocado toast or iced coffee, but obviously the people saying this haven’t had either because both give us life—and they aren’t thinking about the future. Because of this, many believe they can’t have the luxuries other generations had. While there may be some truth to this, other factors have come into play as well, such as:

  • High healthcare costs
  • Employers not helping with 401k
  • Inflation
  • The “unpaid intern” debate
  • Rough job market
  • High college tuition costs

And that’s just the tip of the iceberg of what makes millennials’ generation different from previous ones. But if you’re looking to beat the stigma, become a homeowner, and power through this era, you still can. Here are a few tips to do so:

  • Start your 401k early (the earlier the better)
  • Manage your spending
  • Take your career seriously—do what you can to improve and gain the skills and knowledge needed to be successful and, as a result, make more money. While money doesn’t buy happiness, it can buy comfort.
  • Explore health insurance plans. If you’re no longer on your parents’ insurance, explore your options for health insurance so you don’t end up paying too much.
  • When it comes to college, save and apply for scholarships as much as you can. Only apply for loans if you absolutely need to. If you do apply for loans, try to start paying the monthly minimum right away so you can leave college with a bit of it paid off.

While being a first time home buyer may sound scary and out of reach, it can definitely be something you accomplish if you plan correctly. These financial tips can help you stay on the right track to finding the home you always dreamed of as a kid (because we all had one, right?). Soon, you’ll be on your way to “adulting” in your home sweet home.