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Even though housing prices in urban areas are on the rise, there is still plenty of investments for younger people. Buying a house at 25 is possible with a little planning and flexibility.
According to the National Association of Realtors, the average age for homebuyers was 47 years old, with a $93,200 income. Don’t let those numbers discourage you. There is still plenty of room for all ages and income levels to buy a home.
According to Statista, about 85% of first-time homebuyers were between the ages of 22 and 29. While your dream home might still be a few years away, there’s no reason you can’t start an investment today and eventually work your way into the house you want.
1. Make a List of Needs and Wants
Your needs for the place you live and your wants are two different things. You need a bathroom, but you might desire two and a half baths. You need a backyard, but you might wish for six acres. The more you understand what you must have and what you can live with, the better your real estate agent can find houses in your price range meeting your specifications.
2. Consider Location
Many urban areas are the heart of the city. They might be near your place of employment and close to where you and your friends hang out. Unfortunately, the cost to live in those areas is at a premium and may price you out of buying a house at 25.
If you don’t want to rent forever, consider moving out to a nearby small town. You can always move back to your beloved, culturally rich and exciting neighborhood at a later date. Right now, you just need to invest in something and start building equity. You can likely get more house for less money if you’re willing to commute to work.
3. Improve Your Credit Score
If you want to qualify for a loan, you need to have a good credit score. The higher your rating, the better the interest percentage you’ll gain, which frees up your money for other things, such as home improvement.
In Indiana, the average credit score for first-time homebuyers is 670. In Louisiana, it is 667. Aim for a credit score in the 680 or higher. The higher, the better. Make payments on time and pay off debt to increase your rating.
4. Save a Down Payment
You’ll need 10 to 20% for a down payment. Even if you can secure a loan without money down, do you want to pay a higher interest rate than necessary? To get to your goals faster, consider living with family for a year or two and saving the majority of your paycheck toward your new home.
You could also take on a second or third job and put all of those funds toward savings. The money will add up more quickly than you think if you cut all extra spending.
5. Remember Unexpected Expenses
It’s smart to have an emergency fund. When you buy a home, things will break and need repair. You’ll have expenses you may not have considered, such as buying a new lawnmower for the yard.
You may feel you’re at a disadvantage due to your age, but you can put sweat equity into your home and make it better, whereas someone older won’t have the same option and may have to pay someone to do the work for them. You can more easily take on a fixer-upper and do the work yourself.
6. Stay on the Job
One thing mortgage brokers look at is how long you’ve been on the job and how reliable the income is. When you’re young, it’s easy to get bored doing the same task daily. However, if your goal is to buy a new home, you should try to stay put and challenge yourself.
Put yourself in the shoes of the lender. It looks much better to see someone has been at the same job for three years than a person changing jobs every few months. They are going to be much more likely to make their payments with steady, ongoing income.
What About a Co-Signer?
Sure, you could ask your parents to cosign for you. However, when they do this, it makes them responsible for the investment. If you are unable to make payments, they’ll go after the person who signed and their assets for the money.
Asking someone to vouch for you financially is a big request. If at all possible, figure out a way to qualify on your own without help. You won’t put your family in the awkward position of having to say no. You also won’t have to worry about what will happen to them should you lose your job and be unable to make payments.
Have Patience and a Plan
Buying a house at 25 is doable. You simply need to have a plan for how you’ll qualify. Don’t try to get a house out of your budget. Start small, build equity, sell and move. Repeat until you are in the home of your dreams. With a little patience and working a smart financial plan, you’ll be ready to buy your first home sooner than you think.