Many people in their 20s are constantly discouraged from buying a home. They are told that it is a waste of an investment, that they are better off renting, or that they should wait until they are more financially stable. While there are some situations in which a person in their 20s shouldn’t make the move to become a homeowner, we believe that by following this plan, you can be a homeowner in hardly any time at all.
Establish Good Credit
The second you start thinking about buying a home, start establishing a good line of credit to help you get approved for a mortgage loan. An easy way to establish credit is by opening up a credit account with a small limit and pay it off every month. If you do have credit already, make sure you continue to pay everything on time and check up on your credit score to make sure it is where it needs to be for loan approval.
Get Pre-Approved For a Mortgage
Before you start looking around at homes, you need to know how much you can afford––or rather, what loan amount you can afford to make payments on. After a few months of building up your credit score, you can go to either your personal bank or to a home lender to get pre-approved for a mortgage. This pre-approval will simply tell you how big of a loan you can get, not should get, so don’t get too excited when you see a big number.
Have Realistic Expectations
Just because you are pre-approved for a certain amount does not mean that you can purchase a home of that price. You are approved for a mortgage based on your income, not your monthly budget of what you can actually afford. The number you receive does not take into consideration your food, entertainment, or other things you spend money on. You also have to consider additional costs other than your mortgage such as taxes, fees, insurance, and maintenance. With those in mind, calculate an estimate for how much money you will really need to budget and save for.
Save Save Save
Once you know how big of a loan you can get and have adjusted that number to fit a realistic budget for you, start saving towards that amount, plus a little extra. In addition to your down payment, you’ll also need money saved up for closing costs and for any extra furnishings you may want to purchase for your new space. Depending on your income and current amount of debt, you may be able to save up the money in as little as 6 months or as long as a year. This is where your monthly budget comes into play, so you can establish how much you’ll need to save per month to reach your goal in your ideal timeframe.
By following this timeline, you can easily own a home in your 20s. Just follow these steps and let us know when you get around to shopping for homes. Our team at Cooke Realty Partners would love to help you through every step of the homebuying process!