A moment will come when you just can’t stand the thought of writing one more check to your landlord so that he or she can pay their mortgage. According to investment experts, that is the moment when you’re emotionally ready to buy your own Southern Maryland home.
We’d like to expand that list of moments to include longing to get the kids a dog, drooling over the weird paint color you want for the bathroom, and your green thumb itching to dig in its own backyard.
It’s time to start the sometimes-long road to homeownership, but you’re not alone: Others your age have traveled the same road. They’ve paved the way for you, and if you follow the examples set by the successful ones, you’ll soon be picking up dog poop in your very own backyard.
Cold, hard cash
Houses close money – a lot of money, at least initially. And according to a recent survey by apartmentlist.com, of the 80 percent of Millennials who want to buy a home, only 68 percent of them have managed to save less than $1,000. A sad 44 percent of that group have nothing saved.
“Based on their current rate of monthly savings, our survey found that Millennials in many of the nation’s large metros will need at least a decade to save enough money for a 20 percent down payment on a condo,” say the site’s Andrew Woo and Chris Salviati.
Millennials in the pricier metro areas – like San Franciso, San Diego, and San Jose – have a waiting time of “almost 24 years,” they add. According to the study, buyers armed with a 10 percent down payment can shorten the wait time to five years or less.
That means those buyers who choose an FHA-backed loan, a Fannie and Freddie or USDA loan, which have an even lower down payment requirements, are sitting pretty. Then, there are the many local, regional, state, and national down payment assistance program. See? Every cloud has its silver lining.
The moral of the story is to start saving now. Yes, you have student loans, and yes, you still need to pay rent and all your other expenses, but paying yourself first should be your priority if you want to buy a Southern Maryland house.
Your debt
The word “Millennial” is so often followed by the phrase “student loan debt,” that one would think it’s your generation’s middle name. While it’s true that this debt is at an all-time high and some are on the hook to repay as much as $53,000, it’s not the impediment to home ownership that some make it out to be.
The simplistic advice is to boost your income and eliminate your debt when you’re thinking about buying a house. While good advice, it’s unrealistic to tell someone who wants to buy a home to wait the aforementioned 24 years.
And two recent announcements by Fannie Maw may provide relief for many.
Currently, lenders look at a borrower’s debt-to-income ratio (how much you owe vs. how much you earn, known as DTI) and require that it be no higher than 36 percent. After July 29 of this year, however, that ratio can be as high as 50 percent, under certain conditions.
Then, in April, Fannie Mae announced a new policy specifically aimed at Millennial homebuyers who have student loan debt. Basically, it excludes any debt that isn’t mortgage-related (auto loans, credit cards and, yes, student loans) from the borrower’s DTI, as long as these debts are paid by someone else (such as a parent).
How do you find out your debt-to-income ratio? Use the online calculator at nerdwallet.com.
If your DTI is still too high despite the new solutions from Fannie Mae, get busy increasing your income and decreasing your debt. The College Investor offers a brilliant list of 10 “Easy” Ways to Earn $100 per Month and also see 8 Ways to Eliminate your Student Loan Debt.
Credit history
Maybe it’s not student loan debt but a lousy credit history that’s standing between you and homeownership. There’s good news on this front, too.
The so-called “Big Three” credit reporting agencies — Experian, Equifax, and TransUnion — recently announced that most tax liens and civil judgments will no longer end up on credit reports, provided the information in the creditors’ report isn’t complete.
“Specifically, the data [submitted to the credit reporting agency] must include the person’s name, address, and either date of birth or Social Security number,” according to Diana Olick at cnbc.com.
Apparently, errors like this are common, impacting a large number of loan applicants. “With these hits to their credit removed, their scores could go up by as much as 20 points,” Olick said.
Even if you don’t have judgments or liens on your credit record, it’s always a good idea to order all three reports and pore over them for other mistakes. The Federal Trade Commission (FTC) claims that about 20 percent of American consumers have a mistake on their reports. Ridding your report of errors is one of the easiest ways to increase your credit score.
In fact, the FTC study found that “… about 20 percent of consumers who identified errors on one of their three major credit reports experienced an increase in their credit score that resulted in a decrease in their credit risk tier …”
The FTC offers advice on not only how to get free copies of your credit reports but how to dispute erroneous information as well.
If you really want to buy a Southern Maryland home, stop listening to the naysayers. The Millennial generation makes up the largest group of first-time homebuyers, so it’s obvious not all is the gloom and doom they say it is. With new programs and relaxed requirements, buying a home is easier than you think!
Fort Washington MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309
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