While many people spend most of their 20’s getting their first jobs, paying back their student loans, and moving up the corporate ladder, there are others who use their financial smarts to afford a new home when they graduate from college. On average, many of us don’t consider purchasing a home until our early 30s. So, what does it take for someone in their early 20’s to beat the odds and becoming a homeowner? Keep reading.
1. Avoid Debt
The one looming issue that prevents most people from buying a home when they’re young is the fact that they have large student loan balances. Many people don’t want to go in six figures of mortgage debt when they’re still working through thousands of dollars of college debt. So, the one way to set yourself up for success is to avoid debt during your college years. This might mean going to a community college for two years, living at home, or working hard at several side jobs so you can cash flow your education. If you’re able to get through your college years without debt, you’re one step closer to learning how to afford a new home at a young age.
2. Maintain Excellent Credit
In addition to staying out of debt, you should strive to maintain an excellent credit score. Your credit score is determined by a number of things, namely your payment history and your debt-to-income ratio (although other factors go into it too). Your payment history shows whether or not your make your payments on time, so you can’t be late with a credit card bill, a phone bill, or your car payment. Mortgage lenders like to loan money with confidence that they will get their money back, so make sure you show them that although you’re young, you’re just as worthy of receiving a mortgage as anyone else due to your high credit score.
3. Save a Large Down Payment
A recent LendingTree report showed that the average down payment size dropped in the first quarter of last year. However, you don’t always have to go with the trends, because the most financially responsible step you can take when you want to buy a home is to save a large down payment. Mortgage lenders love to see someone who is disciplined and able to save up a large amount of cash. This shows you are taking home ownership seriously and aren’t just trying to buy a house with 0% down, which could imply a bit of immaturity.
4. Don’t Rush the Process
When you’re at the point where you can afford a new home, don’t rush the process. Spend time over the course of a few months looking at different neighborhoods and homes. You might even want to consider buying a foreclosure or a short sale to help get the best deal on your home. Remember that this might just be a starter home and not your forever home, so you don’t have to search for the largest or most updated home. Think of it as your first major investment and take your time finding the perfect home for you.
5. Get Roommates
In order to be able to continue affording your new home, build equity, and reduce stress, consider getting roommates. If you buy a three-bedroom home, you can always rent your home to two roommates and have them pay the bulk of your mortgage. This is great to do while you’re young in your 20’s before you get married or start a family.
Ultimately, it’s very possible for someone in their early 20’s to afford a new home fresh out of college as long as they are financially disciplined throughout their college years and take their time planning this major first investment.
Catherine Alford is the go-to personal finance expert for educated, aspirational moms who want to recapture their life passions, earn more, and take on a more active financial role in their families. Named the Best Contributor for Personal Finance in 2014, she has written for Yahoo Finance, U.S. News and World Report, The Huffington Post, Kiplinger, Investopedia, Business Insider and many more. Catherine is the founder of personal finance blog BudgetBlonde.com and is the innovator of the web course, Get Paid to Write for Blogs.
- Your Mortgage GPS: Step-by-Step Directions for Getting a Mortgage 11,912 views
- Should You Give Out Your Social Security Number to Get a Mortgage Quote? 8,815 views
- 15 Things to Know About Your New EMV Credit Card Chip 7,521 views
- The Ultimate Credit Score Survival Guide: 45 Rules to Help Increase Your Credit Score 7,200 views
- 5 Things You Should Never Put on a Credit Card 4,519 views
- How Do You Compare Personal Loans and Get the Best Deal? 4,062 views
- Mortgage Rates Might Fall Today – Maybe Significantly 3,913 views