Buying a House In Your Early 20s: What to Know and How to Plan

Buying a house in your early 20s is easier than you think, and it happens every day.

According to the Federal Reserve, 26% of Americans 18 to 29 owned their own home in 2019. And the National Association of Realtors shows that 14% of all homebuyers were aged 22 to 30 in 2020.

If you’re in your early 20s, here’s how to make your homebuying dreams come true.

Table of Contents:

Homeownership Benefits in Your 20s 

There are many advantages to buying your first house while you’re young. Here are some of the most significant benefits young homeowners enjoy:

Building your own wealth — not your landlord’s

When you rent, your money goes toward your landlord’s mortgage — not your own. It doesn’t help you build wealth, nor do you see any of it back as the house builds equity.

As a homeowner, every monthly mortgage payment goes toward your loan balance. This builds equity that’s yours. And when you have enough equity in your home, you can turn it into cash with a home equity loan or refinance. Many homeowners do this to renovate their property or pay for sudden bills or expenses.

More equity also means more profits when you sell the home.

You can customize your house to fit your tastes

As a renter, you’re limited when it comes to decorating and customizing your home. You typically can’t upgrade or renovate, and you may be limited to specific paint colors and light fixtures.

Homeowners have control over their property’s look and aesthetic. You can paint and decorate as you wish, and you can update your curb appeal, landscaping, and exterior elements whenever you like. 

You also have the freedom to make more significant renovations, like tearing down a wall to open the floor plan or installing something fun — like a swimming pool in the backyard. These changes will impact your home’s value, so choosing updates carefully can raise the value of your home and build additional equity.

You can pay off your home earlier in life

The sooner you buy a home, the sooner you can pay it off — and that means some serious financial freedom not far down the road. 

Mortgages are typically paid off in 15 to 30 years. Once paid off, your monthly housing payment goes away. The only costs that remain are your property taxes and applicable homeowners association dues.

This allows you to invest more, travel, or even retire. Buying a house in your early 20s puts you on schedule for this to happen near your 50th birthday. The national average retirement age is 67, so this puts you way ahead of the game.

What to Know When Buying a House Young 

Despite its benefits, homeownership isn’t something you should jump into blindly. Buying a house is a big financial decision, and you’ll want to educate yourself before you begin.

Buying a house has upfront costs

Your up-front costs come in the form of down payment and closing costs. You can buy a home with as little as a three percent down payment. Closing costs include things like your appraisal and loan origination fees, and those average about 2 percent of your loan balance.

Don’t forget moving costs, either. Even if it’s just pizza and drinks for the family and friends that lend a hand.

House hunting is a process

You’ll want to fine-tune your budget and find a trusted real estate agent before you start house hunting. Above all else, you must get pre-approved for your mortgage. Home sellers won’t take your offer seriously unless your pre-approval letter is included.

The pre-approval process is simple and is a great place to start.

Most purchase transactions take 30-45 days, depending on the wants and needs of the seller. The waiting game isn’t always easy, but your patience will be rewarded.

How to Buy a House in Your 20s

If buying a house in your early 20s sounds like the right move for you, we’re here to help you make it happen. Just follow the steps below.

1. Start saving now

Begin saving as soon as you decide to buy a home. The more money you can bank, the better.

Saving is done best when you put together a plan and stick to it. Choose an amount you’d like to save every month and set up a direct deposit to a savings account so it happens automatically.

It only takes a 3% down payment to buy a home, but having some extra cash on hand for closing costs or home repairs is a good idea. Pick your target amount and go for it.

2. Explore your finances

Take a few minutes to put together a budget

When you’re pre-approved for a mortgage, the bank calculates things based on your pre-tax income and the bills that show up on your credit report. This makes it easier to qualify and shows you how much home you can buy.

An effective budget will be based on your take-home income and include monthly payments like phone and data plans, utility bills, and living expenses that don’t show up on your credit report. This will give you a real-world look at your financial situation so you can determine how much home you want to buy.

Your budget also identifies places where you may be overspending, so it’s easy to cut back where you need to.

3. Get pre-approved

Getting pre-approved will accomplish many things. You will:

  • Find out what size loan you qualify for
  • Get a clear picture of your credit in case anything needs to be improved or worked on
  • Explore loan programs and interest rates that are available to you
  • Get your pre-approval letter, so you’re ready for house hunting

Your pre-approval letter shows you’re committed and ready to buy when you submit an offer on a house. 

4. Decide what housing situation is right for you

Next, you’ll decide what kind of house is right for you.

Single-family homes, condos, townhomes and multi-unit properties are all options. Once you’ve picked one of those, you’ll choose what home style is right for you.

Last, think about amenities and put together a “must haves” list. Do you need a yard and pet-friendly neighborhood? Maybe you’re looking for something more walkable or on a busy street with retail, restaurants, and entertainment nearby.

Make your list as detailed as possible. Your real estate agent will thank you.

5. Choose a real estate agent

A trusted real estate agent will make buying your first home as simple as possible.

They’ll help you find homes that fit your budget and needs, schedule showings, draw up your contracts, and negotiate on your behalf. 

They also have local experience, which can help you target the perfect property and steer clear of the duds.

Ask your friends, family members, colleagues, or your lender for agent recommendations. Make sure to read reviews before deciding who to go with. Don’t be afraid to interview several options before choosing your agent; they play an essential role in how smooth your home buying process is.

6. Begin house hunting

Once you have an agent, a pre-approval letter, and a budget, it’s time to begin searching for your first home. 

Set up listing alerts so you’re in the know each time a home that meets your needs hits the market. If it feels like the one, work with your agent to submit an offer as quickly as possible, and get ready to negotiate.

Once your offer is accepted, you’re close to becoming a homeowner. Let your lender know your offer was accepted, schedule your inspection, and start packing those boxes. You’ll have keys to your dream house in just a few weeks.

At what age can you buy a house?

There’s no minimum age to buy a house. If you’re ready and have a down payment, buying a house in your early 20s is a smart move. 

If you want to buy a home young, start planning now and get in touch to let us know what you need. We’re here to help.

Happy homebuying.

Dan Green

Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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