Perhaps it’s time for you to leave the nest or, maybe you’re just tired of tossing your money into the rental abyss, and you see home ownership as the sensible next step. If you’re in your 20s, investing in a home could either be a savvy move or a significant drain on your funds. Here are a few pointers to help you decide.
CAN YOU REALLY AFFORD IT?
Securing a mortgage loan often depends on your income level, not necessarily your level of affordability or the flexibility of your budget. So, don’t regard the predetermined value as your ultimate housing budget. Instead, re-evaluate your budget thoroughly. Consider your current rental payments and how much you could comfortably pay towards a mortgage. Purchasing a property below your budget can be a wise move that will benefit you immediately and in future. Lower monthly mortgage payments could mean the ability to pay off your loan more quickly, or survive financial difficulties without facing foreclosure.
WHAT ARE YOUR LONG-TERM GOALS?
Most 20-somethings are not settled in their lifetime careers or homes. If you’re single and not planning to start a family soon, don’t rush into buying a expansive house. Conversely, if you just got married and plan to have a child, ensure to consider this when house hunting. Strive to purchase a house that aligns with your 5-, 10-, and 15-year plans. For example, if you see family growth in your future, look for a property that can cater to a growing family. If you have plans to relocate in the next decade or so, consider avoiding costly properties that will need to be sold eventually.
CONSIDERING HOME OWNING IN YOUR 20S? IMPORTANT THINGS TO KEEP IN MIND:
IS A 20% DOWN PAYMENT NECESSARY?
Purchasing a house doesn’t always require a 20% down payment. Sometimes, it’s possible to secure a home with 0% down, especially with deals for first-time homebuyers prevalent in your area. However, you’ll have to contend with private mortgage insurance (PMI) if you don’t make a 20% down payment. This might add around $1,000-$2,000 annually to your mortgage payments. PMI can be removed once you’ve attained 20% equity in the property. For my husband and me, we bought our home at 22 with less than 20% down, incurring higher PMI payments. Fortunately, a housing market boost a year later added $100K value to our home, allowing us to refinance at a lower rate and remove the PMI.
PREPARE FOR ADDITIONAL EXPENSES
Online mortgage calculators can be handy, but they rarely include additional costs like HOA fees, PMI, taxes, and insurance, which can significantly inflate your monthly payments. Moreover, the home buying process involves several associated fees, like the inspection cost. Once you’re a homeowner, expect extra costs that go beyond those of a renter.
Thinking of buying a home in your 20s? I’d say, go ahead. Just ensure that your mortgage repayment lies comfortably within your monthly budget. A little creativity and hard work can transform any house into your dream home. So, don’t break the bank for a ready-made perfect home.
Did you invest in property in your 20s? Share your insights! Or, are you in your 20s contemplating a home purchase?
