A survey by Fannie Mae found that a majority of millennials did find it more sensible to buy a home rather than to rent. At least two-thirds think it’s a good time to buy, however, we are more pessimistic about the process compared to other age groups.
Here are the Myths
“I need an excellent credit score.”
Many millennials believe they need an excellent credit score to get a home loan. The Federal Housing Administration (FHA) loan program is a great option for anyone with less-than-perfect credit. Although credit standards have been historically strict, they have been easing recently. Some lenders will provide a home loan to borrowers with a credit score as low as 580!
“I Need 20% down to Purchase a Home.”
FHA is not only a great option for those with less-than-perfect credit, but it is also great for those looking to make a small down payment. FHA only requires 3.5% down compared to the commonly mentioned lender preference of 20%. Millennials are expected to be 33% of the homebuyers in 2017. Some lenders are anticipating millennial demand and are offering conventional loans with 95-97% financing!
“I need to find a home before getting a loan.”
Actually, that’s backwards. Getting a mortgage pre-approval will tell you exactly how much you can afford and what your payments will be. Sellers will not sell to a buyer who is unable to prove that they can actually afford the property. A pre-approval is like having a check written out to you. With this money, you will know you’re budget and what to look for.
“I don’t need a real estate agent. I can do this on my own.”
You can try to purchase a home on your own, but why would you? There can be over 20 parties involved in a transaction and there are countless things that can go wrong. You go to a doctor for your health, a lawyer for legal advice; why would you not use a trained professional to handle the biggest financial investment you are ever going to make? Oh, and did I mention that it’s free to use a buyer’s’ agent?
“I can’t afford a home. I will probably be rejected for a loan anyway.”
First step is to apply for a home loan. A recent study by the Harvard Joint Center for Housing Studies recently found that there are approximately 5.5 million renter households. What does this mean? About 50% of millennials in the major metropolitan areas have the necessary credit score and income to qualify for a mortgage TODAY!
Barriers to homeownership may not be as high as perceived to be.
The first step to owning a home is knowing if you can finance it, how you can finance it and to contact a real estate professional. Millennials and first-time homebuyers should never assume that they can not afford to buy a home. And just a heads up, if you can afford rent, you can probably afford a mortgage.
Just keeping it real [estate].
Chandra Etienne, P.A., M.S.I.R.E.
Chandra Etienne is a God-fearing wife, mother and entrepreneur helping others build wealth through homeownership. With 10 years of experience in real estate, loan modifications, foreclosures and short sales. Chandra brings her wealth of knowledge to assist millennials and first-time homebuyers with the homebuying process, asset management and building credit worthiness. When she is not working tirelessly for her clients and being a wife and mother she advocates for pet ownership through adoption. Visit her site www.chandraetienne.com to learn more.
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