The idea of being a homeowner is important to millennials, but there’s a whole world to see before they delve in to the “American Dream.” While the generation may not be prepared to sign for a mortgage immediately after graduating college, statistics show they are quickly becoming the biggest group of homebuyers in America. The National Association of Realtors reports first-time buyers in 2016 were about 32-years-old, making roughly $72,000 a year. The same report states 92% of first-time buyers were satisfied with the home buying process, which suggests the real estate market should prepare for more buyers as millennials begin to see the benefit of homeownership.

Preparing to be a homeowner, however, is much more than hiring a realtor and choosing a good floorplan. While times have evolved in the financial industry and a 20% down payment isn’t always necessary, it’s a good idea for the millennial home buyer to know how much of a down payment is needed, how to save, and how to better their credit score to make the process much smoother.

Do I Need A 20% Down Payment?

The short answer is probably not. For first time home buyers there are different loans available that support a down payment as little as 3.5%. FHA loans are backed by federally qualified lenders and can offer home buyers a chance to buy a condo in Austin, TX, or any other real estate market, for much less than 20%. For example, the median home price for first time buyers in 2016 was $182,500. With an FHA loan, buyers could have the option of putting down $6,387 (3.5%) as opposed to the “traditional” 20% of $36,500.

Even if an FHA loan isn’t available to home buyers, they may be able to opt for a conforming loan, which is sometimes offered when a loan is below the funding criteria limit of Freddie Mac and Fannie Mae. A homebuyer’s credit score plays a large part in qualifying for a conforming loan. Based on the applicant’s financial information and credit score, a down payment below 20% could be acceptable.

How To Save For A Condo Down Payment

While searching through new condos for sale in Austin, TX, homebuyers will ultimately come up with a budget for their first home. After finding the perfect new, trendy condo, homebuyers can calculate what the down payment will be. Then, the saving begins.

There are two main ways to save for a down payment on a condo: spend less or make more. Depending on the situation, one of those choices generally comes easier than the other, and can be determined with a quick review of the homebuyer’s spending habits. Here are some quick tips to challenge any homebuyer to save more each month:

Track where the money goes: write it down, use an app, or go old school with an Excel spreadsheet.

Evaluate spending habits: where is excess spending happening – on the commute to work at the local coffee shop, Friday nights out with friends, or the trendy boutique downtown? Homebuyers must be willing to cut back in the short term to gain for the future.

Cut the extra: once it’s decided where the excess spending is happening, it must be a conscious choice to put that money into savings rather than in a new dress or meg-mocha latte.

Credit Scores Count

Let’s face it – most homebuyers (and homeowners) have been late with a credit card payment, or ran up a credit card with “must-have” items they can’t even find. While their credit score may have taken a hit during their 20s, homeowners need to know the score, and work on bettering it, if needed. The best ways to better a credit score:

·       Make all payments on time

·       Make at least the minimum payment (more if possible)

·       Don’t max out credit cards and don’t close them out once they’re paid off

·       Settle any unpaid debts on the report

·       Keep low credit card balances

It won’t happen overnight, but dedicated homebuyers will quickly see the cash add up when they consciously choose their future over the #5 value meal. Get the process started with a look into some of Austin’s newest condominiums.