It never ceases to amaze me how surprised people get when I tell them that I'm both unmarried and own my home. I was car shopping this past weekend, filling out the requisite paper work, when the sales guy asked me a few casual questions.
"You rent your home, right?"
"No, I own."
"Oh," he said with a look of surprise as he checked off the "own" box on the credit application.
I'd argue that nowadays (especially with the abundance of Millennial-related real-estate articles on the internet), many Millennials are forgoing home ownership for two reasons.
The first one is they wait until marriage because at that point, they probably have a better idea of where they want to live, stability in the workplace, etc.
The second one is they value low-key, low-maintenance lifestyles. Home ownership often doesn't fit this value point.
But honestly, owning a home is still a great money move in most areas. Here's how to buy a home in your 20s – I did it at the tender age 26 – and make it happen when you don't make a lot of money. I was making less than $40,000 a year when I applied for my mortgage.
1. Know where you want to live.
I moved to New York when I was 23 years old. After two years in the city, I wanted to move back home to Georgia (and not just for the interim).
Having the experience of living far away from home was an amazing thing because it taught me what I did and did not want. I knew that moving back south was (most likely) for the long haul, so I felt comfortable with my decision to put down some official "roots."
After you're completely sure on where you want to live for the foreseeable future (three to five years), it's time to roll up your sleeves and figure out how much you can afford.
2. Shore up your credit.
Twenty-somethings may have low (or no) credit, which means you'll have a hard time getting approved for a mortgage. If you have zero credit, try opening up a credit card with a small limit, and pay it off every month.
If you do have established credit, be sure to review your credit report and keep your balances at 30 percent or below your credit limit in order to boost your credit score. Also, be sure to pay all your balances on time.
3. Get pre-approved for a mortgage.
You can't seriously shop without knowing how much you can afford to spend. But getting pre-approved for a mortgage is actually super easy.
I like this Bankrate calculator. It helps to play with the numbers to see how your monthly payment would be affected, depending on your interest rate and down payment. You can get pre-qualified with any lender, the bank you have your checking and savings accounts with or specific home lenders. Often, you can do it easily online, in just a few minutes.
You should also be aware of the types of loan products that exist. Many first-time buyers can qualify for an FHA loan (and only put 3.5 percent of the purchase price down).
Having a lower down payment helps alleviate a lot of the financial barriers that come with home ownership. Also, don't be afraid to rate shop.
4. Aggressively save for six to 12 months.
OK: So you know how much you can afford for a mortgage. But what about a down payment? If you don't have a large nest egg or a gift from family members, it's time to start trimming the budget and saving aggressively.
This is the most important step you should take if you want to buy a home in your 20s.
Even though I was making under $40,000 at my first job in Atlanta, when I was ready to get serious about home buying, I steadily saved 20 percent of my paycheck. I didn't have any credit card debt at the time, so saving was especially important.
I also was making a little money from my blog side hustle, and putting a good portion of those funds away as well. I had also saved up any bonuses and tax refunds, and thought I'd use them for either a trip or another large purchase one day.
You don't have to save 20 percent of your paycheck, especially if you have student loans. But the most important thing is to set a goal and put aside money consistently for six to 12 months before you want to buy. This will help build up your down payment fund.
You will also need extra money for closing costs.
5. Research and leverage down payment assistance.
For my first home purchase, I researched the crap out of every down payment assistance and grant program that I could find. In 2013, Atlanta was offering $15,000 in down payment assistance grants to first-time homeowners who purchased foreclosures in certain neighborhoods.
It was a good bit of paperwork to do, no doubt. But in return, I received $15,000 in down payment assistance. It's a "soft loan," and it gets forgiven a little bit each year.
I also could use the money however I chose: for a down payment, for a principal or for both. I only had to pay $1,800 at the closing, plus the $500 in earnest money.
6. Do all your homework.
It wasn't just the down payment assistance that led me to the home I eventually chose. Since I had worked for a hedge fund when I lived in New York City, I knew a little bit about how and why to do research – otherwise known as due diligence – on a house.
I drove by the home I ended up purchasing several times before I signed the contract.
- at night
- during the day
- during both the morning and afternoon rush hour (to gauge traffic)
I read press releases and news articles about activity in the area and did a lot of Google digging. I spent time in both the neighborhood and the parks.
I even went to the neighborhood association meeting. Pro tip: If you're looking to buy in an "up and coming neighborhood," make sure that it has an active neighborhood association. This has made all the difference when it comes to my comfort level and outlook on my neighborhood.
Do this so that you're not surprised by anything once you move in.
7. Don't buy a home that you know you can't afford.
This is probably the biggest key to remaining a 20-something homeowner. When you have a low salary, large student loan payments and other variables in your budget, it's important to buy a home you can comfortably afford.
Think of your mortgage, taxes, fees, insurance and maintenance in your budget as well. Here's another awesome calculator that can help you figure out how much you can afford.
Also, remember this: Just because they approved you for an amount, that doesn't mean you have to buy up to that limit.
Home ownership is smart, but it can be expensive if you don't prepare.
A version of this post was previously published on the author's personal blog.