Are you a 20-something-year-old who is looking to buy your very first home? We know it can be pretty overwhelming and confusing. Somewhere along the way, the home buying process may leave you wondering, “What in the world have I gotten myself into?” But don’t worry! We’ve put together these tips for buying a home in your 20s to make things easier!
1. Determine What You Can Afford
We’ve all heard it before, live within your financial means. This statement also applies to buying a house. As you look at homes, it is important to have a strong understanding of what you can afford based on your credit score and your financial history.
Look for properties that are within your buying capabilities. Buying outside of your finances capabilities can cause problems down the road affecting your ability to make mortgage payments and maintain good credit. When you buy inside your budget, you set yourself up for financial success.
2. Stash a Ton of Cash Under the Mattress
Storing cash under your mattress might not really be the best idea these days; the point is to start stashing your money away. In order to get a mortgage in this post-recession economy, the bank often requires a down-payment on your home of about 5%-10%.
If you’re looking at a $100,000 home, you’ll need $5,000 – $10,000 in cash at closing for the down payment. Plus, you’ll be expected to cover additional closing costs.
3. Build up Your Credit Score
Banks desire a credit score that is over 700 for anyone seeking a mortgage. The national average score is 695. You can’t raise your credit score in the blink of an eye, but we’ve put together several guides for those at various levels:
- How to Increase Your Credit Score by 200 Points
- How to Increase Your Credit Score by 100 Points
- Quickly Increase Your Credit Score by 40 Points
Figure out how many points you’ll need to raise your score then read the applicable guide above. It’ll give you specific strategies you can set in motion right away.
4. Apply for Grants and Payment Assistance
All of that credit score talk can feel really stressful! Here is some exciting news for you: There are grants and programs available to make it a little easier to purchase your first home.
Bankrate.com offers a list of nine ideas to help get you started:
- FHA Loan
- USDA Loan
- VA Loan
- Good Neighbor Next Door
- Fannie Mae or Freddie Mac
- Energy-efficient mortgage
- FHA Section 203(k)
- Native American Direct Loan
- Local Grants and Programs
Each type of program has its own qualifications, so be sure to read up on each individual one!
5. Get Pre-Approved for a Mortgage
Many real estate agents will not even begin showing you houses if you have yet to be pre-approved for a mortgage. This is different from being pre-qualified. During the pre-approval process, a mortgage lender looks at your credit and income and writes a letter stating how much of a loan the bank will grant you once you make an offer on a home. A good real estate agent will help connect you with a reliable lender to get you started.
What questions do you still have about the house-buying process? We are available to answer all of your questions. Contact us at Info@GoCleanCredit.com or 480-991-4885.