Three Mortgage Tips for Millennials

With a difficult job market and significant student loan debt, the Millennial Generation faces greater challenges than their parents did when buying their first home. What can this cohort do to prepare to buy their first home?

Those born between 1982 and 2003, often referred to as the Millennial Generation or Gen Y, face different challenges when it comes to qualifying for a mortgage than their parents and grandparents faced. This age group came, and is coming, of age during a time when the labor market appears to be undergoing a structural change, meaning jobs are more difficult to obtain. As a result, they tend to earn less in inflation-adjusted dollars than their parents did, change jobs more frequently, and they are forming households later in life. Decreased earning power combined with a hefty student loan debt burden, makes saving for a down payment for a home a significant challenge.

Here are some tips for Gen Y from a mortgage expert to help them prepare for securing a mortgage:

• Make payments on time and monitor your credit report: Just one or two late payments or errors on your credit report can damage your score and make obtaining a mortgage more difficult or more expensive than it would otherwise.

• Watch your debt to income ratio: If you have a significant student loan debt load, you’ll need to limit the amount of credit card debt you have on a monthly basis. Additionally, you may need to postpone buying a new car until after you purchase your home

• Explore down payment options: Many first time homebuyers take advantage for Federal Housing Administration (FHA) loans since they require only a 3.5 percent down payment. Additionally, many states and towns also offer down payment assistance programs. Additionally, if you are eligible, VA and USDA loans allows for 100 percent financing.

While Gen Y faces new challenges when it comes to buying a home, working with an experienced mortgage broker can make the process much easier.