Thinking of buying a house in your 20s? While this might sound crazy to some, it’s actually doable but still depends on your financial situation.
If you’re wondering why buying your first home at a young age might be a good idea, here are some of the benefits.
- Living on your own and knowing you own a home gives a certain type of freedom that can contribute to the next steps in your life;
- You’ll have the chance to grow up much sooner than other people. Owning a house goes together with much more responsibility than just renting a place.
- You can earn an extra income. Renting a room in your new home is a fantastic chance to earn passive income on a monthly basis.
- This will be your first big investment. The real estate market might be changing all the time but buying a house in your 20s can be one of the smartest moves you make.
- It helps your credit history. Working with credit from such a young age and paying back your home loan can significantly increase your credit score.
- Once you have a home, you can focus on other things. Not owning a property makes people insecure and even anxious as they know they need to get a loan at some point. If you’ve already done that and have started paying off your mortgage, you can stop worrying and know that no matter what happens, you have a roof over your head. Now, you can start saving money, build an online business and earn from side hustles and eventually leave your 9 to 5.
- You’re saving money. I decided to save one of the best benefits for last. While renting money means spending an amount each month without getting much in return or providing for your future, owning a house in your 20s means each payment goes to pay off your debt. Also, that is usually much cheaper than the rent you’d pay otherwise.
Now that you know why buying a house in your 20s is worth it, let’s see how to do it without going broke. As this is a big step, there are things you can do wrong which will cost you a lot.
Here’s what you should know.
Tips for Buying a House in Your 20s
1. Decide where, what, and why.
Start by making sure you want this and be realistic. Do your research so you can be aware of all the challenges of buying a property. You can’t just get a loan and change your mind in a few months.
Of course, the house you buy this year doesn’t need to be the place you live in for the rest of your life. And that’s why your next decision is crucial too – figure out what kind of home you want.
Starters are usually easier to get. They aren’t big houses, cost less and financial institutions can approve you for a loan much faster. Also, as you’re young, it makes sense to buy this and move elsewhere with a partner many years from now and when you’re ready to have a family, for example.
In addition, don’t aim to get your dream home when buying a house in your 20s. Realistically, you can’t even have a vision for it yet as you might not have figured out other important things such as what career you want, whether you want to work for yourself or not, if you want to relocate to another country, and who’s going to be your partner in all this.
Next, think about location. Many things can go wrong here if you don’t do your research or talk to a good agent. The prices in some neighborhoods might be insane, so living in another one – even if you never imagined yourself there – makes more sense. Where your job or school is and how you travel around the city are also factors to consider.
Find out why you want all this too. It must be part of a bigger plan. Know the advantages and disadvantages of buying a house in your 20s, talk to others who’ve done it, and imagine your life as a homeowner.
2. Get pre-approved for a mortgage.
Do this before you even begin looking at houses around the city. See how much you’re approved for too before imagining what your future home is going to be like. It might be less than you think and that’s no reason to give up.
In fact, most people live in bigger houses than they need to only because the bank says they can afford it. But with all the unexpected expenses with owning a house and the monthly bills of a bigger place, that can be a bad financial decision.
Experts suggest you get less house than you can afford. Here’s why.
3. Find a real estate agent.
If you think buying a house in your 20s is possible without a realtor, you have more to learn first before taking the step. While it costs you money, it saves you more in the long-run.
A real estate agent will charge you only after the home is purchased, which means you have the chance to see plenty of properties and only make a deal when you find the best one. Most often, you won’t even have access to these homes without a professional guiding you.
You can also have a consultation before you work together, ask all your questions, learn how the market works and what’s the best amount to work with when buying a property based on your financial situation.
4. Know the whole cost.
The whole cost of a home includes:
- Down payment – that’s the money you pay for your new house upfront. This amount can be pretty big depending on the home and area, so be prepared for that. You should already have an idea where that money will come from, whether it’s your own savings, from your parents who want to help out, or elsewhere.
- Closing costs – these are the costs connected to the real estate transaction and some of them include an application fee, appraisal, attorney fee, credit report, escrow fee, property tax, transfer taxes, document preparation fees, and many more. Your realtor can describe all of these in detail.
- Real estate agent commission
- Insurance – homeowner and hazard insurance, owner’s policy title insurance, lender’s policy title insurance, private mortgage insurance.
- Home inspection.
- Other legal fees such as for conveyancing.
- Moving costs.
The final number might exceed your expectations tenfold, but that’s what buying a home at any age looks like, even if we’re talking about a small studio that’s not located centrally.
5. Manage your money better.
If you successfully go through all this, get your mortgage and move to your new home, you’ll have to make some big changes in your life, especially when it comes to your finances.
Your monthly bills will look different now so make sure you automate payments and cover it all, before you spend the rest of your money.
Earning more is a good idea too so another part-time job will be good. Explore online side hustles too, such as freelancing, to earn an extra $1000/month or so.
There’s a chance to buy your first home at a young age without going broke. Follow the tips above and do an extensive research, don’t take quick decisions either. Give this process a whole year if you have to so you can end up in the right home without any major financial mistakes.
What else are you interested in knowing about buying a house in your 20s?
Stock Photo from 4 PM production @ Shutterstock