How to Own a Home in Your Twenties

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I realize it might sound crazy! Owning a house????? You're barely making payments to your student loans, your income only allows for a modest apartment and your lifestyle seems so far from that home with a white picked fence.  Isn't that something you do once you're in a steady relationship? Once you have children and a great career? Those are all very valid points and I agree it does help to have a plan in place.  So let me help you with that decision making process.

1. Thing long term investment

Millennials are the generation of technology, and they're used to having all of the information they need at their fingertips. This is very different to how real estate deals were handled in the past. Twenty-somethings tend to do more research and educate themselves on what they are looking for, which is great -- but it's important to try to avoid creating the "perfect house" in your mind based on your research, because you most likely will not find it.

Millennials also have a very different value system from past generations of first time home buyers. They often consider themselves to be terminally unique. They want a home that will reflect and emulate their individual personality and lifestyle. This is a great attribute to have at any age, but if you are a first-time home buyer, you may have to settle for now in order to work towards your long-term dream home.This means you might have to settle for something smaller, maybe with finishes that might not be ideal, or a small backyard.  Compromise! You may be more inclined to continue saving and looking for that perfectly unique home, but if you are paying rent in the process it makes more sense to invest that money in a home, built up your equity and move later.

2. Consider your credit rating

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.  Poor credit can take a very long time to repair so even if your dream of owning a home seems years away, improve your credit score early on.

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.

There's many apps that act as a mortgage 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.

4. Prepare, prepare, prepare

The above two tips assume that you have money sitting in the bank. So, what if you don't?  The fact of the matter is that it is increasingly difficult for millennials to even dip their toes into the careers of their dreams without extensive amounts of education under their belts (which, of course, generates more debt, further reducing the amount of money they have to spend).

You need experience to get work, and need to work to gain experience, so many millennials marching from one low-paying job to another, not earning nearly enough to pay off their debt for prolonged periods of time. In many cases, this vicious cycle leads to millenials going back to school in their late twenties to hopefully gain additional credentials for better career opportunities.

Due to this and many other factors, many millennials are opting to stay with parents or live with roommates much longer than in the past. So if you are one of these millennials, you are not alone -- in fact, this category is overcrowded if anything.

For those that are far from the dream of owning a home -- that's OK. Start now!

You may have a million bills to pay, but your future home should still be on your priority list. Try to put aside a bit of money each month towards it. You can do this automatically through your bank, RRSPs (since you're a first-time home buyer) or an alternate way to put money aside that works for you -- just make it a priority.

5. Don’t buy a home 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.  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.

 

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Kasia Ozog

Kasia Ozog

Sales Representative
CENTURY 21 First Canadian Corp., Brokerage*
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