The appeal of owning a home in America has shaped the demographic landscape for generations. Yet in survey after survey, millennials continue to defy expectation and tradition, balking at home ownership, delaying life milestones, and even having cold feet about moving altogether. But is it really by choice? Not quite.
Regrettably, too many graduates in this demographic find themselves saddled with debt – making the option of taking on even more debt simply out of the question. A 2019 survey by Bankrate showed that 61% of millennials don’t yet own a home, and nearly a quarter of them cite student loan debt as the reason.
Having enough for a down payment and maintaining a low DTI (debt-to-income ratio) are two important components of securing and affording a home loan. The frail bank account of a recent graduate often has little immediate room for building net wealth, resulting in higher DTIs likely to spike interest rates and cause denials.
If you’re one of these young professionals setting out to achieve this key marker of the American dream and are worried about your chances, you’re not alone. Here are a few things you can do to increase your odds of getting a mortgage and owning a home.
Your DTI is your monthly debt payments divided by your gross monthly income. Lenders judge your ability to repay your debt using this percentage and lean heavily away from any potential borrowers in the higher range. You can get your number lower by taking some resolute steps, starting today:
Achieving an excellent credit score takes time and can’t be done overnight. While you certainly don’t need to strive for the “800 Club,” you can do a few things to get your score higher in the shorter term:
Many people struggle to put a down payment on a home—especially the traditional benchmark of 20%. Fortunately, there are a few ways to achieve that coveted percentage that can get you a lower interest rate and more equity in your home right off the bat. You may be able to chip away at closing costs, as well.
Ever thought about sharing a property with a friend? Don’t mind the idea of co-owning a condo, and renting it out while you’re away for some much-needed supplemental income? Sharing may not be for everyone, but for those keen on the concept, a joint-applicant (co-borrower) on a loan could have some advantages. Depending on where you both stand financially, combining your incomes and credit standings could mean easier approval or qualifying for a higher loan balance. Or if you pool your savings for a bigger down payment, you may be able to save money with a lower monthly payment or pay less interest in the long-term.
But if ‘forced friendsgiving’ or splitting/sharing vacay time isn’t for you, you can always ask a parent, relative, or trusted friend to be a co-signer (rather than co-owner), or guarantor on your loan and have your digs to yourself.
Focus in on your student loan repayments, and keep your eye on the prize. More likely than not, some careful planning and budgeting for your future will get you towards your home ownership goals—even if you can’t taste it just yet. We’re here to help you get a step or two closer to your ambitions—whether that’s a house in the hills, a trip overseas, or anything in between.
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