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A Millennial’s Guide to Buying Their First Home: Here’s How

If you're a 30-something thinking about buying your first house, you're right at home among the 36% of millennials who make up the homebuyer pool.

But if you started adulthood during or after the Great Recession, buying a home might seem like a daunting process. After all, millennial homebuying trends show that saving and being cautious with finances are common traits among this generation, possibly due to their burden of student loan debt and the difficulty of finding jobs right out of college.

Buying a home doesn't have to be scary, but you should go in prepared. Here is some helpful information to walk you through the process of buying a place to call your own.

Ask the Hard Questions

Start out by answering the basic questions below:

Am I Ready to Become a Homeowner?

The first thing you'll want to do is make sure your finances are in order. Start by checking your credit score. There are a number of ways to do this, you've probably seen advertisements for several. But you can get your free FICO® Score* through Experian, and find out what factors influence your credit score, track when your score changes, boost your score and find the right credit cards for you.

Depending on how your credit report looks, you may have some work ahead of you to repair your credit. Simple steps such as paying your bills on time, paying off debt or keeping low balances, not opening new accounts and leaving unused credit cards open but with zero balances can all make a big difference on your score.

Reaching out to a lender is another way to get the ball rolling. Lenders can prequalify you for a loan so you'll have a good idea of the loan amount you're able to get, and in turn how much house you'll be able to afford.

When buying your first home, you'll likely want to tinker with the numbers quite a few times. Use this mortgage calculator from HomeLight to figure out a baseline of what you think is affordable by plugging in your numbers.

How Much Should I Have Saved?

A few costs you can expect with buying a home include:

  • Down payment: Anywhere from 3.5% to 20% of your loan amount, depending on your mortgage type
  • Closing costs, moving costs and mortgage payments: 2% to 5% of your mortgage amount
  • Repairs, maintenance and utilities: These can be unpredictable, but experts have recommended setting aside 10% to 20% of the home's cost annually

Conventional wisdom says that you should also save a three- to six-month cushion in the form of an emergency fund (enough to cover all living expenses in case of emergencies).

Who Should I Talk To?

If you're already working with an agent, you can ask him or her to recommend a lender who can help get you into the best position to purchase a home.

Don't have an agent yet? HomeLight can help you compare agents in your area and find the right one for you.

House Hunting

Now that you know what you can afford, it's time for the fun part: house hunting.

Start by figuring out what area you want to live in. You might have an idea of what part of town you want to live in, so go online and see what houses go for in that neighborhood.

To help further narrow down the search, make a list of must-haves and nice-to-haves. Must-haves are non-negotiable—features you can't live without. Nice-to-haves are things you could forgo but would love to have in your new home.

Now compare your must-haves with what your ideal neighborhood has to offer. You might find that your ideal neighborhood doesn't meet your must-have list, or that you can't afford it if it does.

Continue looking in neighboring areas until you find a few homes that might meet your criteria. As soon as you've found them online, don't waste time. Go see them in person as soon as possible.

Should I Make an Offer?

When you finally find "the one," work with your agent to decide if it's time to make an offer. Your agent will create a comparable market analysis that looks at sales in the area and considers what the home was last appraised for as well as the home's condition and how long it's been on the market. All of these factors will inform your agent in coming up with a viable offer, should he or she agree that the home is a good choice for you.

Then What?

Once your offer is accepted, it'll be your turn to do your due diligence, which usually entails a general home inspection and inspections for specific potential issues such as radon and insects. The results of said inspections might spur on another negotiation, especially if major repairs are required.

Then comes the appraisal. The mortgage lender will want to make sure that the money it's lending you is a solid investment, so appraisers will come to assess the condition of the home.

Close the Deal

If things go well all the way to the closing day, you'll have a final opportunity to walk through the home and make sure it's in the condition you expect. Check that any presale repairs or other conditions have been met before inking the deal.

Then you'll likely sit down at the closing table and sign papers with your lender and title company. Once this process is finished, the home becomes yours.

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