Being in your 20s usually means having an entry-level salary, college loans to manage, and a desire to have the freedom to enjoy life while you are young. Does that make it the best time to buy your first home? Depending on your circumstance, this stage of life may be the absolute best time to buy your first home. The following questions will help determine your best path forward.
- What are the benefits of purchasing a home in your 20s?
- Annual rent hikes will be a thing of the past when you own your own home. Consistent, reliable payments come with homeownership.
- Think of all the home customization you can do when you own your own home. You want your home to match your personality, and owning means you can integrate the things you love into the decor and design of your new home by painting, upgrading, and renovating.
- Successfully navigating a mortgage at a young age can help you establish a solid credit history leading to more significant financial opportunities later on.
- Homeownership can come with several significant tax advantages that can help you lower your tax burden
- Are you financially secure? Most financial planners recommend that homeowners make a down payment amounting to 20% of the sale price. Depending on the market and the home you choose, this could be a large sum of money. Of course, there are ways around this by paying private mortgage insurance or applying for down payment assistance. Some types of loans only require anywhere between 3-5% down. There are also closing costs to consider, and they typically range from 2% to 5% of the loan amount. Closing costs are paid in addition to your down payment at the close of the sale.
Additionally, owning a home means planning for unexpected home expenses. Unless you buy new construction, an emergency fund to pay for home repairs such as roof damage or water leaks will be needed. Using a mortgage calculator to see how much your mortgage will likely cost is a beneficial tool. Make sure you factor in the costs of maintenance/repairs and your regular monthly expenses like utilities, food, phone, car payment, and more to determine your budget.
- How is your credit score and your debt-to-income ratio? Your ability to get a mortgage depends on your credit score, your debts, your income, and the home you’re looking to purchase. Mortgage companies will look to see that you have stable employment, solid income, and the funds to cover the mortgage for which you are applying. Mortgage lenders usually require borrowers to have a minimum credit score, and they look at your credit utilization ratio.
- Do you plan on staying in the area for a few years? Even if you are unsure if your current location is where you want to live permanently, it still may be financially beneficial to purchase a home. There are waves in the housing market, but most properties will appreciate over time, even a short amount of time. You need to be willing to stay in the property long enough to cover your closing costs and any upgrades you make after a resell. You can also plan to rent out your first home for some passive income if life necessitates that you make a move.
Just remember to do your research, and your first home purchase does not have to be your “forever home.” If you have a move coming up this fall, give Zippy Shell a call. We would love to explain how our moving and storage services can help you achieve a smooth and stress-free move. We look forward to hearing from you!