Despite what boomers have to say about the younger generation and their obsession with avocado toast — seriously, how can anyone hate on such a delicious and healthy snack? — those in their 20s do save their pennies and buy homes. Yes, buying a home while young can prove to be more of a challenge financially than it would later in life after your salary improves. However, doing so early also can give you ample time to pay off your investment and even retire early.
How does a young person on a shoestring budget manage a heavy-duty expense like homeownership? It can be easier than you think! Here are seven tips if you’re considering investing in your first home so you can make the most out of every hard-earned dime.
1. Start Saving Early
The earlier you start a savings account, the better. If you’re one of the fortunate souls whose parents began a savings and investment account for you when you were younger, congratulations! You may have enough moolah to get started already. But even if your folks never helped you save, you can still do it.
Speaking of the folks, one way to save money more quickly is to live at home. Perhaps the idea of moving back in with Mom and Dad after college may not sound super appealing. However, depending on your location, monthly rent may cost you $1,000 or more per month. In one year, you could amass over $12,000!
It’s also important to get spending under control to save more. No, you don’t have to give up lattes forever, but try restricting your Starbucks habit to a once-per-week treat instead of a daily splurge. Cook other meals in, too, to save even more cash quickly. Make sure after you have a down payment saved up, you also keep an emergency fund — you don’t want to buy a home only to foreclose in six months due to losing a job.
2. Build Your Credit Rating
Your credit rating determines the interest rate you pay on your loan. While there may not seem to be much difference between 3% and 4% interest, the minor difference can mean paying $30,000 or more over the life of your loan.
Some lenders advertise that they approve mortgages if your credit score is as low as 580 and, given what happens politically in the next few years, rules may or may not grow laxer. However, the extra thousands you’ll pay with such a low score begs consideration. Since you’re in your 20s and have time, work with a credit repair company and pay down debt to raise your score quickly.
3. Take On A Side Hustle
Not bringing in enough with your day job to save for a home before you hit age 30? Why not take on a side job? Side hustles not only bring in extra cash, but they also help you learn new skills to build your resume.
If you’re not keen on reporting to not just one, but two or more bosses daily, why not consider starting a business on the side? Blogging, bookkeeping and pet sitting are just a few ideas you could try. Who knows? You may find you love being an entrepreneur and grow successful enough to quit your day job eventually — talk about a win-win!
4. Look For Financing Assistance
Believe it or not, programs exist to help people of all ages experience the dream of homeownership. If you served your country bravely in the military, the Veterans Administration offers VA loans. The best advantage of these loans is they require no money down, although a down payment will, of course, reduce mortgage payments.
Are you a teacher, firefighter or a police officer? The Department of Housing and Urban Development offers incentives to allow such public servants to buy homes in specific neighborhoods. The USDA offers agricultural loans to those buying in rural areas. These loans also feature zero-money-down plans. Other plans exist for those committing to fix up certain properties.
5. Consider Starting Small
Be realistic. Do you need a McMansion for your first home? Chances are, unless you already have a passel of children, the answer is no.
Smaller homes have many advantages over larger models. The smaller the home, the eco-friendlier it is. Plus, you’ll save a fortune on utility costs. Speaking of eco-friendliness, look for money-saving features when evaluating a home. Something as simple as low-flow bathroom fixtures can raise the resale value of a home by as much as 3%. LED lighting saves money on electricity, as do suitable window treatments, and a xeriscaped lawn means less to maintain.
6. Look Farther Away From Metro Centers
Finally, when looking to buy, consider purchasing a bit farther from major metro areas. Yes, city living offers convenience. However, you can find three- or four-bedroom homes in the country for a fraction of the price of a studio apartment in New York or San Francisco.
No, you don’t want to sit in traffic on your commute. But depending upon your industry, you may wish to explore telecommuting options with your employer at least some days of the week. As a bonus, you’ll save gas money as well as wear and tear on your vehicle.
Yes, You Can Buy A Home While You’re Young!
Anyone over the age of 18 can purchase a home in the U.S. Indeed, home purchases represent one of the smartest investments a young person can make. Now that you know how to do so on a budget, you can get out there and start looking for your home sweet home!