5 Adult Habits That Will Get You That Much Closer To Buying A Home

For many millennials, homeownership seems like an unattainable goal. And with rising home prices, poor credit history, ballooning student loan debt, and stagnant wages, closing day feels so far away (if impossible) for many. Even though you may not be able to buy a home today, tomorrow, or even five years from now, you can start habits that will make becoming a homeowner seem less like a dream and more like a reality.

I talked to some real estate and finance experts for their top tips for getting into a homeowner’s state of mind. Once you start implementing these strategies, you’ll be closer to someday having a place to call your very own.

Let’s be clear: We’re also not suggesting that renting makes you less of an adult. It’s just that some of these habits aren’t very fun and will require you to shuck some of the devil-may-care attitude of your youth. You’ll also have to think ahead. Sounds like a pretty adult thing to you, wouldn’t you say?

This may be a no-brainer, but it bears repeating. A healthy credit score is a must in the home-buying process, says Tania Isacoff Friedland, an agent with Warburg Realty in New York City. One of the best ways to keep your credit score climbing is simply paying your bills on time. In fact the largest part (35 percent) of your FICO score makeup—the credit score 90 percent of lenders use—comes from credit payment history.

Another habit that pays off when you buy a home is simply keeping your debt to a minimum, Isacoff Friedland says. According to Nerdwallet, when you apply for a mortgage, your lender will look at two numbers to measure affordability called your front-end and back-end debt-to-income ratios (DTIs). DTIs are how much you pay in debt every month, divided by your pre-tax income.

Your front-end DTI, or household ratio, includes all your monthly housing charges (e.g. expected mortgage payment, property taxes, insurance, HOA fees). You should aim to keep this at or below 28 percent.

Your back-end DTI is your housing charges plus all your monthly debts (e.g. minimum monthly credit card payments, car/student/personal loans). It’s the DTI that is usually most important to mortgage lenders, and it’s recommended to keep this number below 36 percent.

Even if homeownership isn’t in the near-near future for you, it can be helpful to keep these numbers in mind as you make financial decisions like renting a new apartment, opening up a new credit card, or buying a new car. And if you do one day decide to apply for a mortgage, this habit will help prevent you from having to make any big last-minute adjustments to lower your DTI.

Real estate seems like it always requires a mad dash to get your paperwork in order. But a good habit to get into now is keeping all your important paperwork together in a clearly-marked file. You’ll need a lot of official documents like tax returns, employment statements, and bank records when applying for a mortgage, so gathering them ASAP will help prevent headaches.

Jamie Heiberger Harrison, an attorney with Heiberger & Associates, says that if you think a co-op or condo is in your future, this file will especially help come board application time, when it’s likely you’ll need all of this—plus reference letters from your employer, landlord, and friends and family. Even if it’s too early to get these more timely documents in order, it can be a good idea to start researching the requirements and compiling the names and numbers. That way, you can just reach out when it’s go time.

If you end up deciding to buy a home, it’s likely you’ll take out a mortgage and homeowners insurance policy. Heiberger Harrison recommends reaching out now to both brokers for preliminary information.

An insurance broker can help you understand what is needed to qualify for a homeowners insurance policy. And a mortgage broker can help you determine what kind of down payment you need and how aggressively you can save, says John Holloway, co-founder of NoExam.com, a digital insurance brokerage.

“Once you know how much money you can save each month, you will have a good idea of when you will be in a position to purchase a home,” he says.

Speaking of planning for the future: Heiberger Harrison says most commercial banks require two years at the same job for a mortgage loan. If you’re planning a job or career change in the near future, know how it might affect your mortgage options.

When saving up to buy a home, a piggy bank may not cut it. Instead, Isacoff Friedland suggests making your money work for you by setting aside of portion of each paycheck in an interest-bearing savings account. Work with your bank or another financial professional to figure out what percentage works for you.

If you’re intimidated by the stock market, she encourages potential homebuyers to check out apps like Acorns, which simplifies investing for beginners.

“Integrating things like this into your daily life will help you to save money faster for your home purchase,” she says.

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