Millennials are a significant part of the housing market boom as first-time homebuyers. Reports show 63% of millennial home shoppers plan to purchase a home because of their new remote work status.
If you’re interested in becoming a first-time homebuyer, there are some things you need to know. As you start the real estate process, saving for a down payment—often while paying off debt in tandem—can feel like a big hurdle.
However, by using the below strategies you’ll be able to save enough to buy your first house:
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Don’t Be Embarrassed By Your Debt
For a long time, I would make minimum payments on credit cards/student loans and glance at my accounts a few times per year. I felt embarrassed that I accumulated debt, so I wasted precious time and money on higher interest rates. (I’m not alone, nearly half of millennials go as far as hiding debts from romantic partners).
But the more I educated myself, the more I realized I wasn’t an outlier. According to a 2020 Northwestern Mutual report:
- Millennials have an average of $21,367 in student loan debt.
- Forty percent of borrowers say they didn’t understand the implications of taking out student loans (which makes sense, as you’re likely 17 or 18!).
- When it comes to credit card debt, 42% of Americans have it, with an average of $5,400.
And those are just averages—it doesn’t mean you’re abnormal if you have more than that.
Get up close and personal with your debt, interest rates, repayment options and all the juicy details. Attack higher interest rate debts first. Most importantly, understand what you owe and research available alternative options. The sooner you know what’s in your wallet, the sooner you can save enough to become a first-time homebuyer.
Consider Temporary Living Situations
There’s no shame in living with your parents. As of July 2020, 52% of young adults lived with their parents. My fiance and I followed this trend. We lived in his parent’s home while it was on the market and helped with the sale and downsizing process (they started snowbirding).
Was it easy or fun? Nope. Did it help us save a significant portion of our down payment so we could become first-time homebuyers? You bet! If you can, consider living with roommates or family members for a set period to save on rent. While not ideal, it’s one thing that can have a considerable impact. Plus, a designated timeline makes it much more manageable.
Reduce Monthly Expenses
When saving to become a first-time homebuyer, every little bit helps. You might scoff at coupon-cutting ways, but reducing monthly expenses and redirecting that money into savings adds up quickly. Try these tactics:
- Health Insurance: Next to rent, this can be one of your highest expenses. If personal circumstances allow, consider switching to a high-deductible health plan (HDHP) to save on your monthly premium. If you’re young, healthy, and don’t go to the doctor often, these types of plans are designed for you. As the experts at HealthMarkets explain, the Affordable Care Act covers many preventative services for free, meaning you could benefit from an HDHP and still receive necessary care before meeting your deductible.
- Share streaming services and subscriptions: J.D. Power found that Americans spend an average of $47/month on streaming services. Splitting monthly subscriptions (think Netflix, Spotify, etc.) with family or friends can lower those recurring entertainment costs. Many platforms now allow for multi-family viewing.
- Compare costs: Catalogue your regular expenses, see where you’re spending most, and then research alternative options. For example, you might be wasting money on groceries due to food you don’t eat. A meal delivery service (even a few days a week) could be cheaper.
Start Working With Professionals
Fear and intimidation can be a barrier to working with professionals on your finances—don’t let it!
“I don’t have enough money to hire an accountant or financial advisor.”
“I’m not ready to talk to a real estate agent; my down payment is measly.”
Sound familiar? Well, it’s not true. There are financial and real estate professionals who work with every type of person, including a first-time homebuyer. When saving for a down payment (especially if it’s a one-year or more process), a financial expert can help you understand low-risk options to invest that capital, rather than having it sit in a savings account.
As you start the home buying process, an agent explains the ins and outs. Additionally, a mortgage lender helps you understand crucial financial details.
Start Your Home Buying Journey
You can become a first-time homebuyer, even while paying off debt. The first step is education! Take stock of your financial situation, research and reach out for professional help.
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