Buying a home in your 20’s can be a great financial move if you can make it happen. Read on for practical steps and tips for purchasing a house before the age of 30.
- Decide where you want to live: Determine what your life plans may be for the next 3-5 years and go from there. Choose where you want to put down roots for the next few years and then begin looking at the real estate market in that area.
- Get your credit in line: Buying a home in your 20’s may mean that you have little to no credit. If you have no credit, consider getting a credit card with a low limit and pay off the entire balance each month. This will help to build your credit before purchasing a home. If you have some credit already, be sure to use 30% or less of your available credit and make your payments on time. Take a look at your credit report (you are entitled to one free copy per year) and ensure that there are no errors in it.
- Get pre-approved: It’s not a good idea to home shop until you have been pre-approved for a mortgage. Obtaining pre-approval allows you to search for a home with confidence and have a better idea of how much you can actually afford.
- Save, save save: When buying a home in your 20’s, it’s important to save as much as you can before making the big purchase. Setting a goal of saving a percentage of each check may be a good place to start. Saving for a down payment is crucial because the larger the down payment, the smaller the mortgage payment will be. Although 20% down is standard, you may want to look into qualifying for an FHA loan which would require only 3.5% down.
- Do some research: Read up on the neighborhood you’re interested in and find out about the amenities, crime, school district, etc. Figure out how long your commute to work will be. Drive by the home in the morning and evening to get a good sense of the area. You may even want to attend a neighborhood HOA meeting to get the inside scoop on the area. Your Realtor is a great resource; ask them to tell you all that they know about the neighborhood.
- Don’t stretch your budget too much: When buying a home in your 20’s or at any other age for that matter, you don’t want too large of a mortgage payment. Really sit down and study your finances to figure out how much you should spend. Although getting pre-approved can give you a good starting point on what your budget should be, it doesn’t need to completely dictate how much you spend. Think about what your mortgage payment will be, what utilities will cost you, what the taxes are, any fees, what the HOA fee is if applicable, etc. Your Realtor can help you figure out these costs as can your lender.