It is no secret that right now, millennial homebuyers have competition. In fact, home sales have been hitting record highs in recent years, with over 6.7 million units sold in 2020!

Well, we can make the process easier with a helpful guide. Here are some of the best millennial homebuyer tips for first-time buyers!

1. Know What You're Getting Into

First, it is important that first-time homebuyers know exactly what comes with buying a home. Do not just look at a price tag or a mortgage payment to determine what you can afford, because there is more to it than that. It is important to know all of the costs associated with buying.

Know the Costs

Are you using a realtor for buying? Well, they are likely to take a percentage of the home price upon approval, although they may still be able to help you save on the initial purchase, assuming you hire the right realtor.

There are also the interest rates you will be paying on the mortgage. It is best that you get pre-approved for a loan before shopping for homes to see what you can afford. This will prevent overwhelming yourself when it comes time to purchase.

It does not stop there. There are moving costs, inspection costs, and often hidden fees that you do not expect. Also, what if you buy this home and the water heater breaks in a few months? Will you be prepared for those expenses?

Crunch the Numbers

Saving for a downpayment is crucial to take a nice chunk out of your loan, get approved, and start building equity. Having a downpayment is fantastic, but having a downpayment with a little leeway is even better. If you can save an extra $10,000 to have on hand at the beginning, then you will be in a much better position!

In that case, let us say your maximum price range is $330,000. You will want at least $10,000 for a broker, inspection, and other fees. Then, you will need a thousand for moving costs, and you will have to factor in at least 3% for interest.

Okay, so your buying power for the home is somewhere around $300,000. You will now need at least a 20% downpayment. With a $10,000 buffer, that means that ideally, you will have at least $72,000 saved up, as you can incorporate certain fees into the loan.

This is not meant to scare you. Often, there are simply better times than others to buy a home, especially for the first time. Your purchase will pay off in the long run, as you will be building your wealth within a large asset. It is simply best that you are informed and prepared for potential issues or added expenses!

2. Don't Neglect Other Debt

This absolutely includes, but is not limited to, student debt. Not only is it likely your biggest stockpile of debt, but it is also a very unique kind of debt.

For example, if you have overwhelming credit card debt, you can get out of it through some unpleasant means like bankruptcy; however, you cannot get out of student debt.

If you are having trouble paying off your student loans and making rent right now, then perhaps taking on a mortgage is not right for the present moment. Examine your circumstances and make sure that you can afford both payments at the same time, even in the event of a major life change.

If you are concerned about making payments after all of the costs associated with the move, do not take the risk. If you can wait and save up for a few more months, do so.

Also, credit card debt has very high interest rates and should be paid off before purchasing a home. If you have to tap into your downpayment savings, so be it. Do not waste money on high interest rates if you do not have to. This should be your top priority.

3. Your Credit Score Is More Important Than You Think

Not only is your credit score important for getting approved for a mortgage, but it can also save you thousands of dollars. If you have a good credit score and you get a mortgage for $300,000 for your house, the difference between a 3% interest rate and a 7% interest rate is $12,000.

Even if it were a one-time purchase, would you overspend by $12,000 on a used car? Absolutely not, so do not do it on a house, even if the costs are spread over a longer period. $12,000 is the same no matter what it's being spent on.

If you are reading this article to prepare for a home purchase two years down the line, then you are in luck. There is a lot you can do to boost your score in that amount of time, even if it is already fairly high.

Keep your credit cards open and use them wisely. This will increase your average length of credit and payment history, which does take time to do. If you want to prevent overspending but still keep them active, lock them away and use them to pay for subscriptions like Netflix, and pay them off in full at the end of every month.

Keep your other loans in good standing, including student and auto loans. Make payments on time every month, and be patient. You would be surprised how much of a difference two years can make, especially if you are younger. 

4. Understand Your Needs

Before you even begin browsing online, it is important to write out your criteria. If you are buying a home with a partner or loved one, sit down and discuss what is needed and what is wanted. Everything should be split into two categories.

Needs

In the "needs" category, you should determine your absolute deal-breakers to help narrow your search. For example, if you have young children, you may not want a pond in the yard, but an extra bedroom for them and a yard to play in. Many of these will even have filters for your search.

Overall, your necessities are related to your own unique situation, but some common examples are:

• Price
• Security system capability
• Office space
• Enough bedrooms
• Wheelchair accessibility
• Newer roof or snow roof
• Enough storage space
• Fenced-in yard for pets

While these are only a few examples, there are plenty of dealbreakers for different people. You may have more specific requirements like EV charging capability. You may detest the idea of a mandatory homeowner's association. Whatever it is, write it down.

Wants

These are the things you would love the most in your house, but that you can live without. Of course, a house will not have all of these things unless you custom-build it, but it is good to have an idea of your wants and to rank them based on importance to you.

• Pool
• Large yard
• Garden space
• Reading nook
• Garage
• Shed
• Finished basement
• Solar panels
• Walk-in closets
• Efficient heating/cooling system
• Central air/vacuum

The list of common examples of "wants" could truly go on forever. Sitting down and talking with your loved one about your vision of the house is both a necessary and enjoyable way to spend an evening. It is fun to dream and envision your future, but it will also help you pick the right house to help you live your best life!

5. Make Yourself Stand Out

There is a lot that you can do to stand out from your competition, and a lot of it is easier than you think. Millennials have a very unfair reputation for being unreliable or lazy, and many sellers may hold that against younger buyers. Well, use this opportunity to prove them otherwise!

First, you should get pre-approved for a mortgage. This will help you show sellers that you are serious and that you have the funds ready to go. This shows that you are a serious buyer and not just a curious viewer.

Also, be communicative with the seller and the realtor. Do not hesitate to show your interest in a property and try to move forward quickly and decisively.

You can also send a letter of interest to a seller for a home that you want to buy. Selling a home is an emotional process, so giving the seller a list of reasons that you want the home and how you envision your life there might just be the deciding factor for them. 

6. Remember, Millennial Homebuyers Are Not Too Common

If you find yourself in a situation where you are ready to buy a home, then congratulations! Millennials have had the most difficult time of any recent adult generation when it comes to homeownership.

The tip here is to appreciate where you are in life, find your dream home, and make it a reality. Now that you have read our millennial homebuyers' guide, there is no time like the present to get started on your search! Stay up to date with our latest real estate news and download our app today to find the right home for you!