Millennials are coming to the age where money feels like it is being thrown right out the window each time a rent check is written to the landlord. In short, they are tired of renting, so what is the solution? Most millennial renters have set goals high, and believe buying a home is in the very new future. In fact, a home buying study indicated that 32 percent of millennials surveyed (30,000 renters total) plan to buy a home within the next three to five years.
However, the reality of home buying is much different. For example, Los Angeles renters expect to pay a down payment of $42,690 on a home when in reality most down payments fall at $65,800. The study indicates that millennial renters would actually need to save for 10 years, which is double the renters’ expectations.
As a millennial, we have been wired to want things now, and are typically impatient. Unfortunately, saving up for a home is considered a marathon, not a sprint. Coming up with the money to own a home takes strategy and requires a lot of saving. Are you ready for the commitment? Below are six crucial things to understand and implement when it comes to saving for a home.
- Start window shopping early to get an idea of what you want. There are so many aspects that go into a home, so be meticulous when it comes to your home search. Size and space are a huge factor for new families that hope to expand. Some will be more particular with architecture and style while others will focus on amenities and community offerings. Find out what is important to you and figure out exactly how much it will cost.
- Expenses surpass just the down payment when buying your first home. Typically, millennials will only look at the price listed, and save enough cash based on that number. However, there are various additional cash expenses that come after the initial purchase which include: closing costs, appraisal fees, buyer’s broker fees, loan application fees, loan broker fees, and inspection fees to factor in. Therefore, research median costs for these and expand your savings plan.
- Set up an automated savings plan. After you determine how much you want to spend on your first home as well as hidden costs of purchasing, you should be putting money aside each paycheck. Just as the vast majority do with their 401K, it might be beneficial to allocate a certain percentage of your income into a savings account dedicated to a down payment.
- Small daily savings can make a big difference. That daily Starbucks run can cost you almost $1,000 a year. Here are other surprising ways that can save you some extra cash:
- Installing low-flow water faucets can decrease your bill by 60%
- Energy-efficient light bulbs can slash your electricity bill by 80%
- Change the car’s air filter to save gas money
- Cutting cable can save on average $100.00 a month
- Understand what a mortgage rate is and shop around for the right mortgage rate. A mortgage rate is the rate of interest charged by a mortgage lender, and these rates fluctuate depending on the deal you can obtain with a lender. Assess your options and don’t be afraid to ask questions.
- Familiarize yourself with what a first-time homebuyer credit is and find out if you can potentially qualify. Even though the first-time homebuyer tax credit is no longer in use, there are several tax breaks that many homebuyers in 2015 and 2016.
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