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“CONTROL YOUR MONEY”
(Apr. 9, 2020) — Soaring student debt, a shortage of housing, and rising home prices. Is owning a home far-flung or beyond the bounds for Millenials? Although many factors contribute to the difficulty for this generation to buy a home, it is still achievable.
The millennial generation (youngest is 24, and the oldest is 39 as of 2020) is barely acquiring homeownership in due course compared to the previous generations. However, this is a statistic that might be enlightened more by the Great Recession than the spending habits of this generation.
Do you want to be among the millennial homeowners? If so, you need to commit yourself to get ready for a mortgage loan just as you’d do for a fitness or weight-loss plan. For a little help, here’s how you can become mortgage-ready. Read on to know more!
Check Your Finances
Before anything else, know where your finances stand at the present time. You can begin by acquiring your credit scores and credit reports. The good news is that you can get a free FICO score and credit report from Equifax, TransUnion, and Experian.
It is wise to monitor or probe your credit report with all the credit bureaus. This way, you can detect any errors or mishaps. Then, organize your financial data. Take note that getting all your financial info will require you to give data that lenders will need and fill out mortgage applications.
Make sure to list all your debts, your monthly payment amounts, and the lenders’ names. Once done, create a list of all your wealth, such as savings and checking accounts, or other savings you possess.
Lastly, don’t forget to review your outstanding loans, balances, and credit cards. Many websites or accounting applications can aid you in gathering all your financial information and keep a record of your spending and thus, allowing you to better control your money.
Establish Your Goals
After gathering all your financial data, it is time to determine your goals. Say, for instance, aside from purchasing a home, you may want to save for a dream vacation or repay your student loan.
That said, it would be best to know when or at what age you want to accomplish your aim and how much it will cost. Also, do focus on the most important goals, relying upon your existing financial situation.
Set a Budget
Once you have established your goals, know your current expenses and income so that you can set a budget, which is crucial to reaching your financial goals. For you to become mortgage-ready, your budget will have a huge influence on your deposit and the amount of your monthly payments.
To create a budget, estimate your monthly net income, list all of your expenses every month, and figure out how much money you have left.
Check Your Credit Regularly
As you reach your objective of becoming mortgage-ready, see to it that you check or examine your credit report regularly or at least once a year. Keep in mind that checking your credit score is a vital piece of pursuing your goal.
Why Could You Be Rejected?
The process of securing a home mortgage loan is sometimes long and often very complicated. Also, a great number of steps can lead many would-be homebuyers to get lost on the way and be rejected.
Moreover, there are many reasons why your application might not be accepted. The following are some of them:
- Self-employed Or A Contractor: Lenders are less likely to lend money to contractors or self-employed as their job is considered less stable. Alternatively, low doc options might be ideal for such homebuyers.
- High Credit Card Limit: Take note that it is not only your credit card debt that can cause your application to be rejected but also having a credit card with a high credit limit. So, before applying for a mortgage loan, do lower or cut down your credit card limit by talking to the provider of your card.
- Lower Credit Score: Millennials tend to have low credit scores literally because they do not have the years of credit history that the previous generations have.
- Loan Guarantor: It can put you at high risk if you are a loan guarantor to a defaulting borrower. Thus, unless you are certain of the repayment history of the borrower, don’t agree to be a loan guarantor because you will be deemed responsible for paying off the loan on her or his behalf.
If you want to become mortgage-ready, then you need to steer clear from opening any new loans. Keep in mind that whenever you apply for new credit accounts, the issuer will assess your creditworthiness, and thus, causing a hard inquiry on your report, which can then hurt your credit score for a short while.