If we all went by movies and TV shows, our 20s are for getting that first job, having that first “real” relationship, and moving into that first apartment. (And of course, PARTYING.)
But your life doesn’t have to conform to by pop culture’s expectations. You’ve got goals and dreams that may not match up with the latest “group of friends trying to have it all” sitcom.
For example, there’s no rule or law that says you can’t or shouldn’t buy a home in your 20s. It could be the right thing for you — but before you go get a mortgage, please read these things you need to know about becoming a homeowner:
1) You’re not too young to buy.
Like I said above, there’s no rule or law that says you can’t or shouldn’t buy a home. In fact, if you’re in good financial standing (see #2, 3 and 4), it could make sense for you to make the investment and start building equity.
2) Your credit report and credit score both matter. A lot. (And they’re different things.)
A credit report tracks your debts — whether they’re paid off or not — as well as each time you apply for credit (ex.: making major purchases like a car or home). Lenders will look at your report to see if you are a good credit risk.
Your credit score, which is somewhere between 300 – 850, is based on a formula that takes into account your existing debts and limits, your payment history, how many types of credit accounts you have, and a few other variables. The higher your score, the better.
The bottom line: Having a “clean” credit report and a higher credit score can mean you’ll qualify for a better interest rate on your mortgage loan.
3) The bigger the down payment, the better off you are.
To be clear, you can buy a home without putting any money down. But if you are able to put down some money up front (maybe you have some savings or just put away a nice haul of birthday checks), that can help lower your monthly payments — just like you do with a car purchase.
4) Shop around for a good mortgage person and rate.
There are thousands of mortgage lenders out there, and it’s best to meet with a few (or at least call/email several of them) to find one that you connect with. Check the Internet for testimonials and take a peek at their LinkedIn profile, because positive reviews are a great sign.
5) Find a REALTOR® you trust that will work hard on your behalf.
You may have a realtor in your family or circle of friends, and that can work wonderfully. If you don’t know one, or you prefer to keep “personal” and “business” apart, you can do an Internet search (same as above for mortgage lenders), and maybe find a company/broker you like (they range from small, independent brokers to the nationwide companies like Coldwell Banker) or just ask around your personal and professional networks.
The bottom line: Consider your options carefully — and don’t rule out homeownership, regardless of your age.
Whether you’re ready to buy a home in your 20s, 30s , 40s or never, I hope you find this advice helpful!
© 2014 Shannon Rubin.