The First Home Mortgage Guide For Millennials Roger Odoardi The Generation Y Guide to Getting a First Home Mortgage. There is an assumption floating around the world of home ownership that millennials, or members of Generation Y, have little to no interest in owning a home. The assumption is that these “youngsters” are okay with living at home, or renting smaller spaces in exchange for high rents. It is a false assumption. Millennials, by most all accounts, are for more motivated to get a first home mortgage than you would think. A recent survey of 1,000 Americans, ages 18-29, conducted by the Demand Institute questioned respondents about their current living situation, moving intentions and home preference. It showed that, despite all the hearsay, millennials are very much interested in starting their journey into home ownership and getting that elusive first time home mortgage. 75% of respondents believe home ownership is an important long-term goal 73% of respondents believe home ownership is an excellent investment So there should be no doubt that Generation Y wants in on the housing market. However, despite all that apparent interest and youthful zest, millennials still have some pretty steep hills to climb when it comes to getting a first time home mortgage. If you are indeed one of the many millennials looking to buy a home, then you already know. Because your generation experiences higher rates of unemployment and low wages, and you likely have some amount of school debt and a potentially questionable credit history, the road to getting your first time home mortgage may be a bit bumpy. “Rising housing costs and strict mortgage standards are making it tough for young families and other first-time buyers to jump into the market” —MarketPulse (Nov. 3, 2014) But don’t be deterred. There is always a way. The following are several challenges a first time homebuyer may encounter, and a few suggestions on how to conquer them and move on. Judging your job history If you’re a millennial, then you likely lack extensive experience at your place of employment. You also may have held several jobs over this part of your life, but nothing for longer than 2 years. While a lender is more apt to approve someone with a stable work experience, all is not lost. A lender can also be swayed into approving your first time home mortgage application—even if you’ve started a new job only days earlier. If your new job is in the same industry, with the same or greater pay, than you may be okay. If your new job is in a new industry, with the same or greater pay, the lender may be a bit wary. Consider asking your employer for a letter once you’ve passed your probationary period with the company—this could give the lender more confidence in your income. Getting your fiscal house in order A first-time home mortgage comes with a lot of paperwork—there’s really no way around it. A typical mortgage process requires a mountain of documentation to prove you are who you say you are and everything you’ve represented up to this point is accurate. Determining what you will need to provide can be challenging. A mortgage broker can help with this complicated information gathering process. Some of the more common paperwork needed includes: Current month’s pay stubs W2 from past year(s) Employment contract Driver’s license And wait there’s more. Be prepared for a credit check, and if you’re getting help remember to get a “gift letter” from whomever’s helping you confirming the authenticity of the cash gift. Savings for your down payment and other expenses A down payment is not always required. There are still programs that allow you to purchase a home with no money down. It is important for you to discuss your savings, gift options and any other concerns with your loan officer so they can best determine the right mortgage for you. You should also ask yourself if you have enough money to maintain the property they’ve helped you purchase. Make sure you have the means to take care of things in case of emergencies. Think of it as protecting your biggest investment. Be sure to take a long look at your finances—don’t just think in the short term. Create a financial planning checklist to prioritize these expenses. Don’t let your debt get you down Debt, most likely student loan debt, can be a real stumbling block toward getting approved for a first home mortgage loan. As if saving for a down payment wasn’t enough, things get especially challenging when factoring in those monthly student loan payments you have to make on top of saving. The key is understanding how your debt-to-income ratio looks and how you can improve it. A debt-to-income ratio is exactly what it sounds like: the amount of debt you have compared to the amount of money you make. In general, you should aim for keeping this number below 36%, but the lower it is, the better your chances are of getting the loan you’re looking for. Knowing the challenges of getting a first time home mortgage is half the battle. As a motivated member of the millennial generation, it’s up to you to take action to ensure you get the home you want now and not later. Blue Water Mortgage Corporation has helped numerous homebuyers navigate the first home mortgage process. If you are new to the process, feel free to visit our tools page for useful calculators and resources to help you decide what you want and what you can afford. Or head over to our glossary for definitions of commonly used terms. You’ll be talking like an expert in no time. Roger Odoardi Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.