Millennial home buyers are going to some difficult times to pay for their first homes. They are more likely than earlier generations to pay for their down payment and closing costs by using some of their retirement savings, saving money by moving in with their family or friends or selling their own personal items.
Millennials are having to be extremely creative and think of the ways that they are coming up with their down payment and closing cost payments. They are trying to use all their options and they are certainly doing that at higher levels than older generations.
Some financial experts urge potential home buyers to make saving a priority for retirement over saving for a down payment for a home. But others suggest that it is okay for people that are strapped for cash to place greater emphasis on home buying temporarily, as long as they redirect the savings to their retirement after meeting their home savings goal.
It is possible that millennials, who are now aged twenty-three to thirty-eight, feel that time is on their side when it comes to dipping into their retirement savings. They are more likely than their elders to feel they can make up this difference over time. And the older an individual gets, the less likely he or she is to have parents in a position to help them out with money.
Here are some tips on how to responsibly save money for the down payment of your home:
Do everything in your power to not dip into your retirement savings. This is the last thing you should ever touch. You will want to have a secure retirement when you get older.
You should see out how much home you can afford. Utilize a home affordability calculator to get a rough estimate and then be even more conservative with your money.
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Make sure you are focusing on what your monthly payment will look like for that mortgage, versus the overall amount of the loan. You might qualify for a three hundred thousand dollar mortgage, but your personal budget might not be able to handle the monthly payment that comes with that once you take into account all these personal expenses that do not get included on your credit report.
Watch your debt to income ratio and credit report and score closely to see the kinds of loan programs for which you might be eligible. Looking at this earlier than later will give you some breathing room to get your credit score back in shape.
Make a separate savings account for your home fund, aside from your emergency fund or checking account. It really just takes saving as much as you can, as early as possible. You should build out a long term plan and save money early and often. Millennials tend to need three years to save up cash for the down payment and closing costs a bit longer than Generation Xers and baby boomers.
If you usually live your life paycheck to paycheck, thinking that you could deal with saving later, it is time to change that mentality. Your situation will not get better until you start actively working on improving your habits. According to the fifty-thirty-twenty rule, at least twenty percent of your income should be allocated towards investments and savings. One dollar that you invest now will eventually be worth more than a dollar you will invest at a later time.
Do you have a question about buying your first home? Click here to contact the Kortney Williams Team today!
Courtesy of Cuselleration