Buying A Home in Your 20s

Buying A Home in Your 20s The stigma that millennials are living in their parent’s basement has slowly been losing its substance.  More and more young home buyers are emerging and make up approximately 32 percent of the market.  Millennials may be young but they have seen the benefits that come from putting down roots and making a smart financial decision like buying a home.  Many financial advisors will try to talk you out of buying a home before you have crossed some sort of financial stability line, but don’t let them fool you into thinking that age has anything to do with it.  If you are in your 20’s and are ready to buy a home don’t be afraid to take that path, just be aware of everything that comes with it.   Budgeting Before you get too excited about owning your own home you should really take a step back and make sure you are financially ready for that responsibility.  If you are married, single or living with someone you need to take into account all of your monetary value.  You want to live comfortably but remember that includes housing, transportation, other necessities as well as entertainment.   A good rule of thumb to follow is 28 percent of your gross monthly income. That 28 percent should include things like your mortgage, property taxes, insurance and maintenance.    When you first come out of college with a job that leaves you with disposable income it can seem tempting to invest more into a home than 28 percent, especially if you bought a car at 15-20 percent, but don’t let those numbers trick you into thinking you have more than you do.  Budgeting will allow you to live well and save for the future. BusinessInsider.com created a great chart to help you visualize what you can afford and you can view that here.   Mortgages The amount of money that you qualify to borrow for mortgage mainly depends on four things: income, expenses, down payment and current mortgage rates. Also, keep in mind the budget that you have created for yourself.  Beyond that there are several different types of home loans, rates, payments, terms as well as other costs and fees.  Lenders take into account things like your credit history  Consider looking into an FHA loan that will allow a cosigner’s income to be allotted when calculating how much you can borrow.  Learn about the different types of mortgages and pay attention to the market so that you can find the best type of loan for your situation. Finding the Right House You probably have a dream house in mind but you might not be able to afford it in your 20’s.  However a lot of young people buy starter homes that they plan on staying in for three to five years to be able to break even on their mortgage.  They aren’t the most glamorous homes or in the greatest locations but you will find them in your price range.   If you are ready to settle into a place for a while you may want to look for something a little more permanent.  New Aging is a way that you may be able to buy your retirement home now.  There are several young people who have invested their money into a home that they fully intend on retiring in.  It involves the community, the home itself and the vision you have for it to transform over the years considering age and disability.  When investing money into a house just take into account the time you intend on staying in it before you commit to anything.   Utilities and Maintenance One of the biggest arguments against young people becoming home owners is because there are a lot of responsibilities that come along with homes, namely utilities and maintenance costs.   When you rent you have the luxury of a landlord who has to take care of maintenance costs and problems every time something goes wrong but when you purchase a house for yourself you have to treat it like your baby.   When you are considering buying you need to take into account all of the maintenance costs that come along with home owning including but definitely not limited to: water, electric, waste management, upkeep, gas, and so much more.   Take lawn care, for example, the  average  lawn mowing price is $44.5 per mow in an area like Cleveland, its probably close to that everywhere though.   This can easily add up to nearly $200 per month just to have your grass cut.   So keep in mind that utilities and maintenance do add up.   However, these things are not impossible to take care of though, if your parents can do it then you have the ability too.   Just be prepared to put in the work and money. Amenities Let’s be honest, one of the perks of owning your own home is having a space that is completely yours and that space isn’t complete without entertainment.  Coming home and relaxing to your favorite television show after a long day of work is one of the simple pleasures in this life.  Being able to share your family vacation or the new dog house you built on social media helps you stay connected with the people you care about.  Internet and television require an extra cost that should be factored into your monthly payment.   I put this last because young people tend to put off the more important things for these amenities but they should be factored in last.  If you want a nice house, keep it nice by gardening and maintaining its value.  This house is your baby.  It needs attention and love to make it the home that you always dreamed to have.  Whether you’re buying a starter home or your home for retirement, you’ve made an amazing financial decision.  Welcome to adulthood.