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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 is 36 years old, with incomes that vary by state. Don’t let that discourage you. There is still plenty of room for all ages and income levels to buy a home if they stay committed to it.
According to Statista, 38% of homeowners are under 35 and both Millennials and Generation Z are finding success. 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 smaller area. You can likely get more house for less money if you’re willing to commute to work. If you have flexibility, consider moving to a state with a smaller cost of living.
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.
According to Equifax, mortgage lenders typically expect you to have a credit score of at least 620. The higher it is, the more likely you are to get a loan. Make your other loan payments on time and pay off debt to increase your rating.
4. Save a Down Payment
Some lenders allow first-time homebuyers to have a 3% downpayment. Some programs even allow you to put $0 down. Remember that in most cases, the less you put down, the higher your interest rate will be.
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 consider freelancing or picking up extra hours at work to save for your downpayment.
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.
The fact that your young may serve your well. You might be able to take on projects that someone with an older body can’t. Doing repairs builds equity in your home, giving you a long-term financial advantage.
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?
If you need to go ahead and purchase your home, you can add a co-signer. Lenders will be more lenient with you as long as the other person has a solid financial history. Keep in mind that if you are unable to pay for the home, the responsibility goes to whoever decides to co-sign it.
If you are unable to make payments, they’ll go after the person who signed and their assets for the money. It’s best not to ever rely on the co-signer and use them solely to secure the loan. If you are unsure your relationship with the other person will manage the responsibility, consider other options.
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.