Let’s face it; the good ole’ days of home buying are long gone.
Banks are more critical of a customer’s financial history, and less willing to lend to risky customers. New rules and regulations, relative to the bygone era, have assisted in maintaining the market’s high standards to home buying.
Let’s dive into some of the hurdles for millennials, and offer some tips to help overcome them.
Challenging home buying requirements for millennials
Finding the proper first home is all about positioning.
Literal positioning; find a city to live in where the job market is strong, and rental prices hover around the national-average. Work, save, and keep your monthly expenses lower than your income if you can. Wash, rinse, and repeat.
More abstract positioning; specialize your efforts with a college degree, strong technical education or other financially-stable job for real-world application.
Yet so many entry-level positions, as millennials can attest, have strict requirements. Home buying is no different.
Here is where millennials can turn to the Federal Housing Authority. To address the reality that millennial home buyers typically don’t have established credit history or substantial assets and income to afford the conventional 10%-20% down payment requirement, FHA loans are available.
Qualified applicants benefit from the FHA loan in a few ways:
- 3.5% minimum down payment requirements – far more affordable than conventional.
- Not required to purchase private mortgage insurance – an extra expense that can be avoided depending on your unique circumstance.
- Eased-up lending requirements. Credit requirements are not as strictly enforced on millennials who want a home, but don’t have the history or inherent value in your credit report.
The benefits to you, the home buying millennial consumer, are enormously helpful on your budget. Affordability is crucial with FHA loans, and BBMC Mortgage specializes in FHA lending.
Available home inventory for millennial buyers
If you’ve done some basic research into the current snapshot of the housing market, you’ll see a lot of sensationalized headlines about the drastically low housing inventory.
It’s true that housing inventories are down, on average, nationwide; it’s a sellers market. But dig in to your local municipality and see what’s available. It could be true for your town that houses valued at $500,000 or higher are incredibly hard to find, but entry-level homes are abundant. Of course, the reverse of that statement could also be true.
The point is, don’t assume based on a national headline that finding an entry-level home in your municipality will prove impossible. Here are some ways to help you find a home that fits your budget:
- Contact a local realtor
- Ask family or friends with recent home buying experience for helpful home-buying advice
- Drive around and see what’s for sale
These are fairly simple ways to find information regarding the availability of entry-level homes in your area, but they can prove to be invaluable.
Once you’ve assessed the situation, it’s time to start your search for a lender.
The important Launchpad for millennial home buyers
For millennial home buyers, knowing how to enter the market and get your foot in the door can be a source of trepidation.
At BBMC, we aim to help eliminate that stress by providing helpful service to guide your journey.
If you’ve done some preliminary research on lenders, you’ve probably seen the words “prequalify today!” or “get your preapproval today!” plastered throughout the web. Well, some lenders might not explicitly tell you there’s a difference between a prequalification and a preapproval.
Simply put, one gives you freedom and one locks you down.
A prequalification is a no-commitment, super casual introduction between you – the buyer – and BBMC – the lender. A preapproval is your tentative agreement to work with a specific lender.
BBMC encourages first-time millennial buyers to fill out a prequalification. Our Banker will gather non-specific information about your employment, income, potential assets and credit background. Then he or she will send you a letter, in writing, outlining what products you qualify for with BBMC and a rough price-range estimate on the house you should go after.
We’re all about helping our clients first and foremost. So if you’re not satisfied with the proposal from BBMC, you’re free to find another lender of your choosing. Your happiness with your home, and your loan, are of the utmost importance to BBMC.
Do your homework and give us a call
Remember, a prequalification from BBMC is kind of like a first date. If, by the end of our interaction, you find that we’re not the best fit for you, then we wish you nothing but the best. No hard feelings!
If you are ready to move forward with BBMC, call or click here to fill out a form online. One of our bankers will get in contact with you to go over the home loan process.
Your parents and grandparents will always glorify the bygone eras of the mid-to-late 20th century. Maybe after your experience with BBMC, you’ll remember your first home buying experience with nothing but fondness and a rosy Instagram filter, too!