Buying A Home In Your 20's

Buying a home at any stage of life can be stressful.  But if you’re in your 20’s, home ownership might seem like a far fetched dream.  Fresh out of school, student loan debt and starting your own professional career are some of those stressors but if you are bringing a steady paycheck - you may be more ready for purchasing a home than you think! 

More than 70% of Gen Z (people born after 1997) want to purchase a home. Of that demographic group, 43% plan to buy a home in the next five years—with 45% of them already saving for that dream home.  (Realtor.com® research)

Most first-time home buyers make their initial home purchase in their 30’s.  However, buying a home at an earlier age can help build your equity, which means you will end up with more down the road! Homeowners who bought their first properties before age 35 had the most housing wealth by age 60, according to a study by the Urban Institute.

So, if you are in your 20’s and considering purchasing your first home, here are a few factors to think about.

Your Credit Score.  Buyers in their 20’s tend to have a lower credit score, averaging about 660, according to the credit-reporting agency Experian. Why the lower credit score?  Most of Gen Z haven’t had the opportunity to establish their credit.

If your credit score runs on the lower end, no worries, our agents can help connect you with a lender who might work with a younger buyer.  There are also other opportunities to buy a home through an unconventional, government-backed mortgage through FHA (Federal Housing Authority), USDA (U.S. Department of Agriculture) or a VA (U.S. Department of Veterans Affairs) loan.  These loans allow home-buyers who have lower credit scores and down payments to still purchase their dream home.

Amount of Savings.  You have probably heard that you will need to put 20% of a home’s purchase price down, however, with the correct lender 5%-10% may be enough!   

You will also need to make sure you have enough in your savings to cover any unexpected expenses like home repairs. A good rule of thumb is 1%-3% of the home’s value in your savings can help if anything comes up or goes wrong! 

Your Five-Year Plan.  Think about where you currently are in your life and then ask yourself where you see yourself in a year, three years, and five years.  What major changes in your life may you experience?   

We always encourage our homebuyers to analyze their lives and where they are currently at to help determine if buying a home makes sense for their short-or-long term goals.  

According to a recent Realtor.com article, many young and first-time homebuyers expect to live in their homes for at least 10 years but homeowners under 35 typically sell within five years. 

Renting v. Buying.  Sometimes it makes more sense to rent, if you don’t know where you will be in a year.  However, if you are renting in a city you know you are going to call home - renting may be costing you more than buying a home. 

You want your monthly payment to go towards something that will benefit you.  Monthly rent payments go straight to your property manager’s pockets while purchasing a home may help you come out on top through appreciation when you sell it later. 

Flexible Must Haves. When you start your initial search as a first-time home buyer you have to make sure your list - locations, home size, bedrooms, bathrooms - are compromisable.   When you are in your 20’s, life can change in a very short amount of time.  You want to make sure that you are thinking long term to see if the home will work for you, if for whatever reason your circumstances do change.  

First-time homebuyers often buy smaller properties and are willing to compromise on size to get a good price, according to the National Association of Realtors®.  However, members of Generation Z, say their ideal home would have three bedrooms and four or more bathrooms, with a large backyard and space for a home office, according to a Realtor.com report.

Still have questions? We love working with first time home buyers!  Give us a call and we can help you establish realistic real estate goals for your future ::: 417-812-5055