Buying a home in your twenties is something that is growing in today’s market, with rental prices going up, purchasing an apartment, condo or home is becoming more of a desirable decision for recent grads and the millennial generation. We think that is a wise decision and something I can honestly say in my mid-thirties I wish I would have taken as a more logical solution to where I am going to build my home life prior to having a family. Some of the advice I am going to offer in this weeks blog are; the financial preparation and benefits for purchasing in your early years, what to look for when deciding to take the leap and some of the challenges you may need to prepare for prior to taking the leap into home ownership at this point in your life.
- Location, Location, Location! Making the decision of where you want to settle down may seem like a simple decision, however many factors need to be considered when taking the leap. Purchasing a home in the years you are working to build your career may mean family is not at the top of your criteria when deciding where you want to live, however the average first time homebuyer should prepare to live in their first home for 5 years but we will get to that shortly, but more importantly, what does your life look like in the next 5 years? Are you on the brink of starting a family and a school district is something you haven’t thought of but may be a large factor in a few years? Do you have family that visits frequently? Is your job in a location where you benefit by eliminating the commute or is it a non-issue? Your twenties are a time of life exploration, you need to figure out what your goals are prior to making this decision. After all, whether you intend to use this home as your primary residence or rent it out, making home ownership affordable in your 20’s really only works out if you can commit to 5 years.
2. Credit Score? What credit score?After you have taken the time to determine where you want to put down roots it’s time to determine your credit score and spend some time working on improving it. A large challenge in making a large investment at this stage in your life is you may not have established credit and those student loans may be weighing down your DTI (Debt to Income Ratio), you may need to take some steps to establish credit before you will qualify for a loan. Twenty-somethings may have low (or no) credit which means you’ll have a hard time getting approved for a mortgage. For those who have no credit, try opening up a credit card with a small limit and paying it off every month. For those with established credit, be sure to review your credit report, keep your balances at 30% or below your credit limit, and pay all balances on time. What programs are out there for 1st time home buyers and will that affect your location decision? Credit Karma has an excellent app that allows you to download your credit score and set alerts right on your cell phone, it is a great idea to start monitoring. https://www.creditkarma.com/
3. Home Much Can You Afford? The next step is qualifying for a loan and getting that pre-approval letter to determine what you can afford. This is a process that may seem overwhelming, if you are working with an agent and brokerage that has consultation, they are going to be a great resource to set you up with a trusted lender they have worked with in your similar situation to assist you in this process. Not every lending institution is going to be a good fit for someone without a large amount of down payment or established credit, this is where Exit Realty Capital City has great benefits to our clients. We educate ourselves constantly by meeting with lending institutions and mortgage companies to make sure we are up to date with the ever changing factors in obtaining a loan. You may qualify for grants and loan options that aren’t available to everybody and some of these options may determine where you want to live. Lending Tree will offer you a quick online opportunity to see where you stand with pre-qualification, however pre-qualification and pre-approval are 2 very different things, this online service will show you a pre-qualification, but it’s time to go to the bank for that pre-approval letter. You can’t seriously shop without knowing how much home you can afford, and doing this homework, knowing how your monthly payment would be affected depending upon your interest rate and money down. Quicken Loans; Lending Tree
4. Down Payment? Depending on where you stand with your credit, a down payment may be a deal breaker. Here are some tips for saving money for that down payment: 1. Cut down on the nights on the town. Take advantage of happy hours and special free events, like food festivals and wine and beer tastings. Keep a list of special nights at your favorite spots, but putting a cap on that fun money is an excellent start to saving and it holds you accountable to maybe hit up that Taco Tuesday with $3 margaritas rather than a Saturday night $7 margarita. Hey, you still get a taco/margarita night, right? 2. Set a budget and within that budget determine a set amount of money you can comfortably take from each paycheck and deposit in a separate account away from the spending temptations. 3. Take-Out! This is a hard one for many who may not be the best chef. Make a night of it and find a friend in a similar situation, look at some food blogs and easy recipes online and take on the challenge to cook at home. It not only teaches you how to make delicious food from home, but you get the entertainment value without leaving your home! Bonus! You only pay for 1/2 the meal! 4. Clothing, it’s time to cut back on that shopping addiction and determine the value of that Saturday shopping spree, you may be surprised what’s hiding in the back of your closet. 5. Travel/Concerts: Traveling out of town for a quick weekend getaway is a great privelage to your twenties, however even at $300 to $500, it adds up. Replace those weekends away with taking the opportunity to get to know your city. There are always festivals, carnivals and fun things to do. Pick up a copy of CityView or Des Moines Register online to check out what is going on in your town to save money and have a good time!
5. You have finally come to the best part of home buying! Shopping for a home! Schedule a meeting with an agent that knows the market you are working in and has a nice sized brokerage full of agents that have their hats in the know of what’s coming up and what areas may meet your needs best. Each town, is made up of several neighborhoods, your agent is going to be able to help you narrow down that search even more at the initial consultation. AND because of the homework you have already done, you can get a weekend set up to house hunt. Exit Realty Capital City has an office in Urbandale and Downtown Des Moines, with agents ranging from every avenue, you have options and when picking your agent it’s important to have someone you don’t mind spending time with, because you WILL spend a lot of time with this person. After you choose your agent, they will set up showings for homes that meet your criteria and help you secure the best deal on your dream home! Sometimes what we felt we wanted in the beginning is not always the reality of what works, after viewing a couple of homes that meet that criteria, if you are feeling yourself head in another direction, reconvene with your agent and reevaluate your search. Don’t be surprised if you check list changes as you start to view homes and don’t be afraid to share it with your agent. Their job is to find you a home you love, in your budget and meets your needs.
Visit www.exitrealtycc.com to visit our agent page and schedule a consultation with one of exceptional agents! From this site you can also view listings and sign up for continued information on property searches.
I hope you found this information helpful.