Donec bibendum aliquam nulla sit amet suscipit. Vestibulum in sagittis erat.
Buying a home in your 20s might seem like a long shot, but in fact, many 20-somethings can — and do — make the leap into homeownership.
Millennials, defined by the National Association of Realtors (NAR) as homebuyers up to age 34, made up the largest group of recent homebuyers at 32 percent, according to a recent NAR survey.
Who are millennial homebuyers?
The median age of millennial buyers was 29 years. While that’s at the top of the 20-something bracket, the median definition means half the buyers were younger and half older.
According to the NAR survey, millennial buyers had a median income of $76,900 and typically bought a 1,720-square-foot home that cost $189,900. Fourteen percent were unmarried couples, the highest proportion of any generation in the survey.
The ability to purchase a home still depends on an individual’s personal and financial situation, says Dale Klimek, a Realtor with Horizon Realty Group in Las Vegas.
“If someone has a little bit of money, fairly decent credit and a job, it is very do-able,” Klimek says.
Here are some strategies 20-somethings can use to make homeownership a reality:
Ask mom and dad for cash
Nearly all, 97 percent, of the millennial buyers in the NAR survey financed their home purchase, relying most often on their own savings or a gift, typically from a parent, for their down payment. The median down payment for millennials was 7 percent.
A down payment gift can be used with a conventional or FHA loan, explains David Krichmar, a mortgage banker with CORE Lending in Conroe, Texas.
How does your down payment affect your monthly payment?
To find out how your down payment affects your monthly payment, plug your numbers into a mortgage calculator. You can also see how changes in mortgage rates impact your monthly payment and overall interest costs.
Consider an FHA loan
In addition to having lower mortgage rates than conventional loans, FHA loans allow a cosigner’s income to be considered. That can help young adults whose own salary or wages might not be high enough for them to qualify on their own, Krichmar says.
FHA loans ignore student loan payments if they’re deferred for at least 12 months. With a conventional loan, both current and future student loan payments are considered, Krichmar says
“The majority of first-time home buyers are probably going to do FHA,” he says.
While Fannie Mae and Freddie Mac guarantee 3-percent-down loans, Krichmar says an FHA loan or a 5-percent conventional loan is usually a better option because the payment and mortgage insurance will be cheaper.
The only time there would be a benefit (of the 3-percent conventional loan) is when the FHA loan limit for an area is too low to allow the buyer to purchase the home they want to buy, says Krichmar.
Another option for those who are eligible is a VA loan, says Krichmar, since no down payment is required. A VA loan is “a fantastic program across the board.”
Purchase a starter home or condo
Many young people naturally start out by purchasing starter homes, which can be smaller, older or located in a less desirable neighborhood compared with other homes.
“It won’t have all the bells and whistles. It won’t be in the cream-of-the-crop neighborhoods, but they will be nice neighborhoods,” Klimek says. “It’s very do-able.”
A condominium can also be a good starter home for a young buyer.
Don’t let age be more than a number
It’s illegal for lenders to discriminate against adult borrowers on the basis of their age. And a common misperception is that a borrower must have a two-year work history in the same job to qualify for a mortgage. Krichmar says borrowers must show a two-year history, but being a student can count toward this requirement.
Not everyone thinks young adults should own homes
Being able to purchase a home doesn’t necessarily mean young adults should do so, says Alan Moore, certified financial planner at Serenity Financial Consulting in Milwaukee.
“I’m not a fan of people in their 20s buying houses,” Moore says. “It’s very expensive.”
Inexperienced buyers tend to focus on their monthly mortgage payment without realizing that owning a home also means paying property taxes, utilities and maintenance and repair costs.
“Completely ignore what the lender tells you that you can qualify for,” Moore advises. “Sit down and really craft a budget and be really realistic about what you can afford.”
Another concern Moore cites is that homeowners typically can’t move as easily as renters can.
“People in their 20s are highly mobile in the job market,” Moore says. “If the house (value) drops 20 percent and you have to come up with money to sell it, you’re locked into a situation you may not want to be in.”
Buying a home in your 20s is certainly feasible and there are plenty of affordable options that will allow you to do so, but young adults have a lot of financial and lifestyle considerations to take into account before investing in something as expensive as a home.
Ut luctus justo elit, sit amet sodales purus vulputate non. Nullam lorem eros, posuere nec sodales at, aliquet gravida dui. Aenean id tellus in libero porta ultricies. Donec viverra interdum bibendum. Sed varius nunc tortor, tempus accumsan massa aliquam sed. Quisque a turpis ut dolor porta auctor a sed risus. Quisque turpis arcu, congue in tincidunt quis, feugiat a erat. Vivamus tincidunt semper ultricies. Integer sit amet facilisis quam. Sed vitae nibh odio. Sed nec neque id nunc ornare rhoncus. Donec congue accumsan justo, vitae mollis ipsum pharetra eu.
Donec lacus nunc, viverra nec, blandit vel, egestas et, augue. Vestibulum tincidunt malesuada tellus. Ut ultrices ultrices enim.
Praesent posuere libero eu justo tristique, vitae ultricies justo volutpat. Sed pellentesque neque eu neque adipiscing condimentum. In hac habitasse platea dictumst. Aliquam fermentum mollis orci aliquam dictum. Proin auctor quis enim ut tempor. Integer convallis convallis interdum. Quisque eget libero ac dolor pharetra vestibulum. Nulla posuere orci at justo vehicula porta.
Mauris ut nibh enim. In feugiat sagittis varius. Praesent pharetra ipsum enim, a fermentum arcu lobortis ut. Vestibulum cursus risus at massa faucibus consectetur.
In hac habitasse platea dictumst
Vivamus et eleifend massa. Suspendisse nec arcu et ligula posuere aliquam. Integer quis arcu vitae nisi sodales tincidunt.
- Proin elementum ante quis mauris
- Integer dictum magna vitae ullamcorper sodales
- Integer non placerat diam, id ornare est. Curabitur sit amet lectus vitae urna dictum tincidunt vel vitae velit
- Vestibulum ante ipsum primis in faucibus
Praesent pretium, massa ut consequat commodo, libero turpis dignissim lacus, facilisis porttitor risus mi vitae purus.