Owning a home in your twenties is possible – it’s actually encouraged and highly commendable. With the right planning, you can say goodbye to renting and hello to homeownership. Renting can come with great benefits, but the fact of the matter is that renting is not helping you earn equity for your investment. Not only does renting require you to make a decision on whether to stay or move to another apartment, but there are also risks of the rent rate increasing.
When you purchase a home, every payment you make is going toward paying off the mortgage and earning equity. On top of earning equity, owning a home allows you experience living in a neighborhood and making a home exactly what you want it to be with no restrictions.
Here are some tips on how you can make home ownership in your twenties happen.
Make the Decision on Where You’d Like to Live
Statistics show that millennials are getting married later and thus waiting longer to buy a home. If you are ready to make the leap to owning your home, the first step is to lock down exactly where you want to live. City, neighborhood, and school zone – all of it needs to be decided. The last thing you want to do is purchase a home and then decide later on that you don’t really want to spend 10 years to a lifetime in a particular area or neighborhood. Making home ownership in your twenties works only if you are willing to commit for at least 5 years. Make sure you have your 5-year plan set before planting roots and purchasing a home.
Quick tip: College Station is one of the most amazing places to call home. We live here and love it and we know you will, too! If you are ready to find a great home, you will find plenty of options in the College Station/Bryan area.
Get Your Credit In Line
If you’re in your twenties, you may have low or no credit at all (or you may have pristine credit!), which can make it difficult to secure a mortgage. If you have no credit, you can try opening a credit card with a small limit and just pay off the balance every month to build credit history. If you have established credit, be sure to check your credit report to see your score and ensure that you don’t have any false reports. Keep your credit balances below 30 percent and pay off the balances on time so you don’t have any derogatory marks on your credit report. Take a look at your credit score from the three major credit bureaus, as your score can be different for each.
Determine Your Budget
How much can you really afford to spend on a home? And keep in mind – what you qualify for, may not be how much you should borrow for your mortgage. After you have decided where you want to live, and you’ve taken the steps to get your credit all in line, you should really look at your finances and determine how much you can afford to spend on a home.
You really can’t start looking for a home until you know how much you can spend. Do your homework and obtain pre-approvals for a mortgage. The Internet can be your best friend when looking to get pre-approved. There are certain websites you can use to play with numbers and see how much your monthly payment could be depending on interest rate and how much money you put down. You can also gain pre-qualification with any lender, whether it be the bank you use for your everyday banking or with home lenders like LendingHome, etc.
Another item you need to take note of is the type of loan you want to take out. Many first-time homebuyers can qualify for an FHA loan and only put down 3.5 percent – having a lower down payment, which can help break down certain barriers to homeownership. Another option is a 203k-mortgage loan to help pay for renovations on a fixer upper home as well as traditional options such as a 15-year or 30-year mortgage. Keep in mind the recent changes to the tax plan may have affected options for certain homebuyers. Do some research and determine what kind of mortgage will work best for you.
Save, Save & Save Some More
Now that you know how much you can afford to pay for a mortgage, you need to figure out how to pay the down payment. If you don’t have a large savings or a gift from a family member, you need to work on saving and trimming your budget. Sit down and go through your monthly bank statements and see what you can cut out. Do you really need that fancy gym membership? Can you skip Starbucks and have coffee at home? Locate areas in which you can save and use that extra money to build up for your down payment. Another thing you may consider doing is asking for a raise. Anything helps!
Utilize Down Payment Assistance
Research down payment assistance and grant programs. Certain cities will offer down payment assistance like $15,000 grants for first-time homebuyers who purchased foreclosures in specific neighborhoods. This process requires a hefty amount of paperwork, but in return you receive down payment assistance. This is a soft loan, which means it is forgive a bit each year. You can use the assistance for a down payment, principal or both.
Finding Your Perfect Home
Now for the fun part – finding your dream home! First, as a first-time homebuyer in your twenties, you will definitely want to the help of a professional real estate agent who knows both the market and the home buying process. A real estate agent can negotiate on your behalf and help you land the home of your dreams at the price you can afford. One of the biggest steps in finding your perfect home is performing due diligence. Once you find a few home options you’d like to explore further, schedule a showing with your real estate agent. On top of looking at the home, you should get a real feel for the neighborhood. Drive by the homes during the day, at night and both in the morning and afternoon during rush hour.
Spend time in the neighborhood, attend a neighborhood association meeting, talk to a few neighbors to see how they like living there. Read articles and news about the area – really use Google to learn as much as you can. Attending a neighborhood association meeting can help you learn about events, projects and so much more that your real estate agent may not even know about. Eliminate any surprises by doing your research.
Know Your Budget & Stick to It
This is one of the most crucial steps to buying a home in your twenties. If you have a low salary, big student loan payments, and other variables affecting your budget, you need to make sure that you are making realistic decisions when purchasing a home. This isn’t a forever home – this is a starter home. Factor in your mortgage, taxes, fees, insurance and maintenance and upkeep into the home buying budget. Also, just because you are approved for a $200,000 home, does not mean you should purchase a $200,000 home.
Your realtor can be a guide in helping determine how much home you can afford, as they know every expense that comes with home buying. Realtors also have a special touch and great negotiating skills so if a home is a tad bit above your budget, you can tap into your realtor’s skills and try to negotiate for a lower price.
Ready to Buy Your First Home? Consider College Station
Buying a home in your twenties is a huge accomplishment and we hope these tips will help you along your journey to home ownership. Determining your budget, working on your credit score and performing due diligence on neighborhoods all while working with a professional realtor will help make the home buying process a breeze. The realtors at Myke Leatham are resident experts in the College Station area and can help you every step of the way in buying your home.
College Station is home to so many amazing opportunities, from the incredible golf courses, dining options, shopping destinations and of course the coveted Texas A&M main campus. Living in College Station is a dream – you can nestle into a cottage-style home or settle into a home that is waterfront. College Station features fun amenities including museums, the George Bush Presidential Library, Lake Sommerville, Opas, A&M Football at Kyle Field, and plenty of restaurants, shopping, camping, golf and so much more.