If you are graduating and heading into the real world this summer you may feel unsure of what your next step will be. Recent graduates, along with millennials, have earned a reputation as the “Peter Pan generation” because of their different way of approaching responsibility; delaying marriage and kids. But one of those, homeownership, may not be as out of reach as you think.
You may be thinking, “Buying a home? I can barely afford to pay student loans!” and you are not alone. Last year an estimated 41% of first time home buyers had some form of student debt. This, in addition to a stagnant economy, has led to limited opportunities to save and unstable incomes for millennials. With the average student debt approaching $30,000 young people automatically think they are not in the position to pay a mortgage, or qualify.
Yet, this doesn’t discourage millennials to pursue their dreams. In fact, for the past two years millennials have held the ranking of largest group of homebuyers in the country. With so much buying power, millennials have reshaped the real estate market to accommodate their needs.
Student debt will never go away, but taking time to plan around it is key. Mortgage lenders will look at student loans the same as any other debt. Your debt-to-income ratio is one of the ways to determine whether or not you will be secured a mortgage which means your two options are to increase your income or decrease your debt.
I know it may sound easier said than done but there are a few ways to go about this. Taking out a private loan from a family member with reduced interest and longer repayment time is one option. Another would be if you’re married to refinance debt between spouses to improve your debt-to-income ratio. Finally, check out a lower mortgage or down payment. This may mean you don’t get your dream house right away, but it will be more beneficial to be patient along the way.
One of the most popular trends among millennials is real estate agents. Agents are able to supply you with research and knowledge of the industry. Even if you’re only leisurely looking for a home, chatting with an agent is a great place to get started.
No matter what you do, make sure not to drain your savings into that first down payment. There are countless costs with home ownership and you should always have money set aside. You don’t want to end up behind on your mortgage if a minor issues occurs.
So if you happen to be a recent college grad, a two-car garage home with a white picket fence may not be achievable right away. But, looking at real estate as an investment instead of debt, millennials can set themselves up for a much more stable financial future.