If you’ve decided that 2017 will be your year to buy your first home, this one’s for you. Here are seven financial resolutions for the new year to help you get started on the road to home ownership.
- Get control of student loans: Millennials are saddled with thousands of dollars in student debt. The average age of a first-time buyer is 33, borrowers in their 30’s and 40’s have the highest level of student debt of any other age group according to the Federal Reserve. It is possible to buy a home while repaying student loans if your other debt like credit cards and your car loan are low compared to your income. If you haven’t yet, refinance your private student loans. The Federal Reserve is expected to raise interest rates three times in 2017, which will also increase other consumer rates like student loans. Refinancing now rather than later can help lower your payments.
- Rethink your lease: A survey taken in 2016 stated that 25% of first-time buyers said that costly rental prices were the number 1 reason they wanted to buy a home. Timing is everything and while it would be nice to find a home as soon as your lease is up.. it doesn’t always work that way. One way to help bridge the gap between your lease end and your new home closing is to find a subleaser for your place. Before you do that though, find out your landlord’s termination policy, are there shorter-term leases available? Are you able to rent month t month and how much notice does your landlord require? Make sure if you do go for a subleaser that they meet your landlords requirements for credit scores, income and rental history.
- Find your down payment a new home: Rates are on the rise, its time to compare interest rates on checking accounts and savings accounts. Often online banks have less overhead but higher rates on savings accounts. Do your research.
- Set a budget: The biggest surprise for new home owners are all the fees associated with buying a new home. You pay your principal and interest each month, home owners that payed a down-payment below 20 percent of the purchase price have to get mortgage insurance. Just make sure you take into account of all of these fees and cover all the bases each month. While your’e in accounting mode now is a good time to get all your financial documents organized. Lenders will want pay stubs, bank account statements, tax filings, W2 and info about your outstanding debt and your landlord’s contact info. Having the info read to go in will help you move more quickly when making an offer.
- Get underwritten fully: You can go a step further with your resolution to get financially organized and get pre-approved for a mortgage and have your lender fully underwrite your loan. Unfortunately for many 1st time buyers, home sellers will almost always choose an all-cash offer over an offer that requires a loan, because there’s less chance the deal will fall through. A pre-approval letter is the next best thing to cash.
- Do some research: Before you put in an offer, understand the market you want to buy into. This requires an honest assessment of your must-haves, include commute times and how close you are to the grocery store. Become familiar with the neighborhoods rules and regulations, a real estate agent can help. Information and knowledge is power. Knowing how long the home has been on the market, if homes in the neighborhood sell for under or over asking price, how quickly the homes sell will all help you know what kind of offer to make.
- Deep Breaths: This year will be the fastest on record and especially for affordably priced homes.You might feel pressure to buy before rates go up but the truth is rates are expected to remain quite low compared to historical averages. Remember that homes will come and go.. but more will always come.Wait for the perfect one to come.