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Millennials and home ownership

Posted January 21, 2015 in Advice Column, Beaverdale

(BPT) – Owning a home is part of the American Dream, yet standards on income, credit and debt are making it tougher to buy a home than it was 10 years ago. Even though requirements are relaxing, only three out of five borrowers get approved.

While stricter standards make it tougher for young families to qualify for a mortgage, millennials  understand why these standards exist and think the tougher requirements won’t stand in their way of buying a home. In fact, millennials are serious about doing what’s required to get a mortgage. They are taking steps to turn their dreams into a reality by getting their credit in order, paying down debt and saving for a down payment.

“Income is a key to opening the doors of homeownership for millennials. Our improving economy is making it practical for millennials who want to own their own homes in a few short years to get ready now. Their strong desire to become homeowners, coupled with the commitment of getting their finances in order, suggests a renewal in first-time buyer demand.

With their prospects improving as the economy picks up, millennials are forming households faster and making more money compared to a few years ago. One in three millennials said an increase of 15 percent or less in income will be enough to turn them into homebuyers, a significant proposition for the economy.

Because mortgage lenders use debt-to-income to evaluate a borrowers’ ability to repay a loan, student debt is a growing burden on millennials interested in financing a home. Unlike medical debt, student debt carries an equal weight to credit card debt.

As for the tougher requirements to getting a mortgage, millennials do think the tougher standards guard against risky loans and will help prevent another mortgage crisis. If you have student debt and want to buy your first home, here are a few ideas and tips to help you prepare:

* Lower your debt-to-income ratio (DTI). DTI is your total monthly income as compared to your total monthly debt payments. Most lenders will only lend to you if your DTI is at or below 43 percent.

* Get your credit score in order. Analyze your credit report before you start the home buying process. Dispute incorrect derogatory information. Pay all your bills on time, reduce credit card balances, and don’t open new credit cards if you already have a few.

* Save for a down payment. Make a budget.  Stash away extra money from bonuses, overtime or financial gifts





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