A house is usually a great investment, whether you plan to sell it out in the future or not. It usually signifies stability and freedom. But before you make a home-buying move, you would want to do some research to make your home-buying experience more successful.
According to statistics, millennials are now our largest population of homebuyers. Even with their love of web research, many still end up making mistakes that cost them more money than necessary. The following are three decisions millennial homebuyers make that often end in feelings of remorse.
Maxing out your loan offer
Most people can afford a house by getting approved for a mortgage. We are always told that homebuyers should do their research and shop for home loans that will best suit their situation. Your mortgage broker may have already processed your application and finally, positive results are in. Now that you know how much money you can borrow and how much of a house you can afford, you are all set in house hunting. But what many fail to tell homebuyers is that there is no need to use up your lender’s entire loan offer.
Mortgage lenders will offer you a loan amount that they feel you can comfortably pay them back. But this does not necessarily mean there is a need for you to borrow the exact amount. You can end up in huge debt and even house poor if you are not careful. For best results, consider borrowing 20% less than what your lender is offering you. This way, you can be sure that you can really afford the house you are paying for.
Pursuing a home purchase with lots of debt
Some would get approved for a mortgage even if they have other existing debts under their name. It may seem like you can afford another debt. But this can mean lots of financial troubles in the future.
Remember that a monthly mortgage payment is nowhere cheap. You may have enough money saved up or you may even qualify for a no down payment mortgage. But with all the bills, expenses, and monthly debts under your name, you can end up being house poor if you insist on buying a house too soon. For best results, pay down your debts first before making your home purchase.
Getting a 100% home financing
Some will gladly sign-up for a no down payment mortgage. This type of home loan may enable you to easily buy a house. But such a mortgage has its own set of drawbacks.
For one, this usually means higher monthly mortgage payments. Since you are not paying your lender any upfront payment, this can mean you will end up with higher Private Mortgage Insurance each month. If you can, save up some cash to pay for a down payment. Paying at least a 20% down payment will give you better loan rates and terms.
Millennials have the advantage of technology along with their parent’s guidance when buying a house. But this does not already mean they are the wisest homebuyers out there. Anyone can make financial mistakes when making a home purchase. This is why it pays to be careful when making money decisions so you can avoid costly consequences when buying a house.