How Millennials can save up for a house

Millennials — children born between 1980 and the early 2000s — are tech savvy and educated, but they also face more financial stress than previous generations. Between high unemployment rates and costly student loan debt, it's harder for Millennials to achieve financial independence. As a result, many Millennials don't have immediate plans of buying real estate.

If you're a Millennial, it might take longer to purchase your first property, but rest assured that homeownership isn't completely out of reach. With careful planning, there's plenty you can do to buy a house within the next decade.

1. Live With Your Parents a Few More Years

There's no shame in moving back home with your parents after college. For most Millennials, down payments and closing costs are the biggest hurdles to homeownership. Even with a full-time job, many Millennials simply don't have disposable income to save 5% to 20% for a down payment or come up with cash for other mortgage-related expenses.

If you and your parents are okay with the idea, move back home and live with your folks while working full-time. Your parents will likely charge less rent than a landlord (or maybe you have a pair of those fiction TV parents who let their kids live at home rent-free — lucky duck!), giving you the opportunity to bank a lot of your income.

2. Get a Second Income Stream

If you can't move back home, secure another income stream and put this extra money toward your house fund. This approach gets you closer to your goal, especially if the money you earn from a full-time job only covers basic expenses and there's nothing left for building a down-payment fund.

"I was tired of rent increases and desperately wanted to buy, but didn't think it was possible, especially since all my income went to rent and other living expenses," says Erica, a 31-year-old English teacher from Chesapeake, Virginia. "I sacrificed my free time and started tutoring and freelance writing on the side. I saved every cent, and in two years I saved a little over $7,000 for a down payment on a condo."

3. Adjust Your Spending Lifestyle

You're young and energetic, and naturally you want to have a good time. But if you're serious about buying a home within the next decade, you need to work in harmony with this goal and adjust your spending.

Cash for a down payment and closing costs isn't going to fall out of the sky and miraculously appear in your bank account, so you need to make smarter decisions. It's okay to have a good time, but being young isn't an excuse to blow your money chasing fun or getting the latest electronic gadgets. The money you spend enjoying the "good life" can be put to better use, such as paying down debt or building your house fund faster.

4. Get Out of Debt

Between 2012 and 2013, approximately 60 percent of students graduating with a bachelor's degree borrowed an average of $27,300, and according to a 2014 Wells Fargo Millennial Study, "About half of Millennials (47 percent) are using more than half of their monthly incomes to pay off various types of debt."

Even if you have a job and cash to buy a house, lenders factor in your debt-to-income ratio. And unfortunately, if your monthly debt payments exceed 43 percent of your gross income, you might not qualify for a mortgage.

Right now, paying off debt should be your biggest focus — and yes, student debt counts. You can also make headway if you take the above advice and live with your parents, or at least split living costs with a roommate.

Making higher payments and living within your means also helps you overcome credit card debt. Too often, young adults are so concerned with having a certain type of lifestyle and keeping up with their friends that they live off credit cards and acquire massive debt at a young age.

5. Fix Credit Issues

According to Credit Karma, the average Millennial has a credit score around 630. There are mortgage programs specifically for borrowers who have a low credit score, but these mortgages come with higher mortgage rates, which means paying more interest over the life of the loan and a higher monthly payment. Improving your credit score will not only help you qualify for a mortgage within the next decade, it can result in a more affordable monthly payment.

Paying down is one way to give your credit score a boost, but you'll also need to pay your bills on time, which accounts for 35% of your credit score. Applicants with credit scores in the mid-700s to 800s qualify for the most favorable rates.