Millennials, called the Generation Y or Echo Boomers, are known as the fun-loving, tech-savvy, goal-driven population group. While buying a house was not a common topic among millennials before. But now, it is a famous “goal” to achieve. To help you prepare well with this significant investment, here are some tips for millennials in buying your first house.
Know Your WHEN and WHERE
Most millennials are renting because of financial convenience. Renting, compared to paying for your new house, seems way cheaper. However, what most do not realize is that owning a house also has its financial benefits like:
- The market value of your house increases as time passes.
- The monthly payment decreases.
- You can style your house the way you want it without the risk of additional penalties that comes with renting.
Here are some factors that you need to consider if you already want to invest in a house:
- Preferred location to settle
- Is it near your workplace?
- How far is the nearest school?
- Is it near bus stops or train stations?
- What is the crime rate within the area?
- Quality of the neighborhood
- The lifestyle you want to practice
- Financial stability
Go to Open House Events
Once you have listed down the potential places where you want to settle, attending an open house event is a good idea. Checking out houses for sale, even if they are far from your preference, is an excellent way to know more about the neighborhood.
During the event, ask for a copy of the price list of the houses for sale in your target neighborhood. Agents usually give a copy to attendees. Then, check the houses with low prices. Think about this - if you buy the most affordable house in a livable area, you have more chances of increasing the home value.
For example, you found a house that has no granite kitchen counter and wood flooring. Eventually, you may renovate the house. The upgrades will instantly increase the value of your house.
Recommended Read: Tips for Buying Your First Home And Mistakes to Avoid
Know How Much Down Payment is Needed
You have decided to purchase one of the houses for sale in Ontario. The next step is to find a potential lender, like a bank, that can help you to pay your mortgage. However, as banks will not pay 100% of the buying price, the buyer will need to pay the down payment to the seller to close the deal.
The exact amount of the down payment that you will need to pay depends on:
- The total price of the house
- The mortgage arrangement with your lender
- Additional costs for permits, taxes, and insurance fees
However, the usual 20 - 30% down payment makes it harder for millennials to own their own house. The solution comes with different mortgage options offered by house finders, sellers, and lenders. Here are some of the most current offers that you can look into:
- Fixed-rate Loan: This type of loan offers you to pay the same rate until the end of your loan. A fixed-rate loan removes the risk of increasing monthly payments as the years go by.
- Adjustable-Rate Mortgage (ARM): An ARM offers a low initial interest rate for a specific time. The lender can adjust the cost of the monthly payment as the interest rates rise.
- Federal Housing Administration (FHA) Loan: An FHA loan offers a low down payment of about 3.5%. However, an additional insurance premium will be added to your monthly payment to compensate for the low initial payment.
- 15-year Term Loan: The monthly payment is higher than other mortgage options. The best thing with this option is you can finish paying the mortgage earlier.
Saving for the down payment and an emergency fund is what you need to do next. Reserving the money for the down payment is your initial step in purchasing your first house. But, it is also best to allocate a certain amount as your emergency fund.
The emergency fund will let you adapt comfortably to your new home, which will remove any worries of shortage for all the new incoming fees. And this funding should cover at least 3 to 6 months of your usual household expenses.
BUT, you should not stop with just having the money. You also need to be smart about where to keep and how to manage your finances.
To make sure that the money you save is safe and earn interest as well, you may deposit your money in an insured bank savings account. You may either choose a local bank or an online bank. Online banks are now becoming popular with their high-interest rates.
A financial coach is one of the best ways a millennial, like you, can diligently manage your money. The financial coach will provide you with a structured financial plan on how to stay within your budget every month.
Apply For Pre-Approval Plans
You are now closer to becoming a millennial homeowner. The next big step to make is to apply for the pre-approval for your mortgage. Your application will depend on the lender’s requirements and the seller’s conditions.
Keep in mind that your monthly payment does not only cover the principal mortgage cost. It also includes the following fees:
- Homeowners insurance
- Property tax
Learn The Art of Negotiation
Congratulations! You are almost done. Now, all you need to do is negotiate. In buying a house or even any property, show the seller that you are interested but do not be too excited. It is best to research on different properties for sale in Ontario so that you have knowledge about the houses that are available on the market.
Buying a house is one of the crucial decisions a millennial or even any person can make. There might be a good number of cheap houses for sale in Canada. Therefore, to make sure that you are getting the best deal, do research, physically assess the property, and check the papers before closing the deal.