Once upon a time, becoming a homeowner at a young age was normal. Our parents and grandparents were often out, married, and buying a home in their 20s. However, the economy has changed dramatically since then, and buying a home isn’t as simple as it once was.
If your goal is to purchase a home at a young age, there are several things you’ll need to do to prepare. Here are some smart tips to help you buy your dream home at a young age.
Start Saving Early
Saving your money early is the best way to prepare for buying a home at a young age. Engaging in this exercise means being disciplined and driven with the end goal at the forefront of your mind. If you have a part-time job in high school, get strict with putting away 25% of each paycheck toward your home fund. Making this sacrifice now will pay dividends later.
In addition to actively saving money, consider the various methods for cutting your expenses. Live at home with your parents for as long as possible, create a budget, and explore all possible grant and scholarship options for post-secondary education. If you’ve already moved out, get scrupulous with your budget and try to continue putting away 15-20% of your paycheck.
Build Your Credit
One of the biggest challenges with buying a home as a young person is building a credit history. When considering credit, we tend to think of correcting bad credit. While this does play an important role, it’s equally important to show a detailed credit history. In other words, you can’t buy a home if you don’t have a credit score at all.
To improve your chances of getting approved for credit and loans to support buying a home, start with a small loan or credit card with a minimum limit. Use this to pay bills and buy groceries, only when you have the money to pay it off immediately. This process will help you start building a credit history.
Be sure to pay your phone bill, car loan, and credit card payments on time to prevent anything from hitting collections and damaging your credit score.
Clarify Your Priorities and Goals
Buying a home is a big accomplishment that’s worth celebrating. However, it’s also a big commitment and will take precedence over other activities. Before you decide to buy a home, consider if there are other goals or dreams that you’d have to sacrifice.
For example, you might have a dream of traveling through Europe. As a young person, you’ll have the freedom to do this. If you have a mortgage to pay, your travel dreams may be pushed to the backburner.
Consider whether buying a home is something you want now or if it’s worth reallocating your resources and delaying your purchase plans for something else.
You also need to consider your location. There is no point in buying a home now if you plan to move in the next five to ten years. Also, your location can make a massive difference in the buying power of your money. For instance, brand new homes in Las Cruces, N.M go for only a fraction of the cost of fairly old homes in San Francisco, CA. So, make sure to prioritize what is important in a location before you decide to purchase.
Seek Stable Employment
Your income level plays a role in your ability to sustain a home and how much you’ll be approved for. However, it’s also integral to have proof of stable employment. In some cases, you’ll be more likely to receive a home loan if you work at a fast-food restaurant for five years, compared to working a high-paying corporate job for six months.
Before you start the homebuying process, get pre-approved by the bank. Taking this step is cost-free and will determine whether you’re in a position to get a mortgage and how much you can reasonably afford. This appointment can also determine what aspects of your life to focus on first (building more credit, saving more money, being at your job longer, etc.)
Know When to Say No
Don’t think that your first home should be your dream home. Your starter home is a stepping stone toward your dream. Spending too much too soon can derail your life.
Know when to say no to a home that’s too expensive. Similarly, don’t buy a home that’s not worth the price because you’re desperate to get started.
With these practical tips, you can accelerate your journey to homeownership at a young age.