How to Buy a House Under the Age of 25
It finally hits you. After four (or maybe more) years you get to walk across that stage, hold your long-awaited for diploma stating that you’re officially a college grad. Of course, you are ecstatic to have accomplished a big stepping stone in life, however with that expensive diploma also comes some fine print.
So you went to college, perhaps made a humble abode out of a lovely campus dorm room or lived in an overpriced off campus apartment with random roommates. Four years pass and you start to finally see the fine print on that diploma. Yes, that means you have to pack up and head back home to your parents. How do you go from living somewhat on your own for four years to living with your parents in their house again?
I was in that same situation in May 2012 when I graduated from college. I spent three years living on campus and then rented an apartment my senior year just so I could bring my cat, Tango, with me. I felt like moving back home to my dad’s house at the age of 22 with a college degree was a step backwards in my life; I wanted to move forward! I started to research apartments that would allow my pets (a cat and a doberman) and wouldn’t empty out my whole bank account. My dad then brought up the idea of purchasing a townhouse, and I was absolutely shocked by that outrageous idea. In no way did I think someone my age, in my situation could afford to have a house, let alone OWN one. Well despite my doubt, in October 2013, right before my 24th birthday, I got the e-mail saying “They are accepting your offer.”
Ok, so that sounds great, but HOW did I do it? How can you also achieve this goal?
Hey, even if you’re older than 25, you could use these tips too!
Would you have a Roommate?
I’ll be honest; I’ve had some bad roommate experiences in the past. The list goes from roomies who would disrespect me and my belongings, roomies who spent money on fast food and cigarettes, but would never replace the toilet paper rolls, and all the way to roomies smoking pot and throwing parties at 4am when I had to wake up for student teaching at 5am. Trust me, I know how much having a roommate can drive you absolutely insane. However, having a trustworthy, compatible roommate would help offset the overall cost of owning a house. I know some people are okay moving in with a significant other. I wasn’t in that boat at the time and you have to be careful there too. However, I did have a sister who was in college at the time. Luckily we have been best friends and for the most part enjoy each other’s company. So, I realize not everyone has a sibling or even if you do, you may not be that close to them or want to live with them. It’s not absolutely necessary to have a roommate in order to own a house; it can simply help though. Living with my sister has not only helped me with the cost, but with the responsibilities as well. However, I could still financially handle the house and the chores without her. So this is more of a suggestion if you’re looking for a way to own a house on a smaller budget.
Budget & Save
Budgeting and saving are great techniques for life in general, but definitely necessary when purchasing a house. When my dad suggested the idea, I realized I had to figure out if I could financially handle not only the mortgage, but all the bills that came along with it (plus the bills that I already had). I suggest getting a little notebook and looking at your expenses each month and see how much you have leftover that can be saved for purchasing a house. I would write out every bill I had to pay for including groceries and pet expenses. I did this for a few months ahead of time to get an idea of how much cash I would have for a house. There are a few fees you have to consider besides a mortgage when purchasing a house. Every home buying experience will vary, but there could be things like the inspection fee, appraisal fee, closing costs, deposits for utility companies, minor or major repairs, appliances (refrigerator, washer and dryer, etc.), moving costs (renting a truck and/or hiring movers), home warranties, and the list could go on. You want to make sure you have enough saved up for about three months of mortgage payments plus extra for all those fees mentioned. Reading all of that seems really overwhelming and at first it does feel like you are literally spending every last bit of money to your name. I moved into my house the week of Thanksgiving, so Christmas was right around the corner. I totally get the scary feeling of being tight on money. However, it’s only like that in the beginning as long as you keep up with everything as time goes on. Plus, if you’ve cushioned your savings and budgeted correctly, then you will be just fine! The awesome thing about closing on a house (besides the fact that you become a home owner) is that you get a few months of a grace period before your payments start. So, it felt like a little gift for a bit after spending all that money.
Make a List of What you Want
It’s important to know what your must haves are for a house you might live in for a few years. You might also want to look at certain things that would be for sure deal breakers. Is there a certain area you absolutely could not live in? Do you need to have a yard? Do you want a HOA so you don’t have to worry about yard work? Do you want to live close to your job? Do you want a garage? How about wood floors versus carpet? If you’re looking for a townhouse, do you want an end unit? Remember, the pickier you are, the more challenging it is going to be to find a house that fits your budget. So you either need to be flexible on the spending or on house details. Making this list will also help you when you meet with a real estate agent and to narrow down your online searches. Speaking about online searches, I found Zillow.com, Trulia.com, and realtor.com to be extremely useful.
Build Good Credit
It appears that a lot of people struggle in this area. People are able to afford a $1200/month rent, but can’t purchase a house with a $700/month mortgage because of bad or no credit. Building credit is not something that happens overnight or even over a few days. However it can take a few poor choices just to ruin your credit. You want to get a start on building your credit as soon as possible. See my post on building good credit to learn more!
Apply for a Loan
Before looking at houses you might want to see what the maximum loan amount you qualify for so you know what price range you can look at when it comes to houses. I applied to two loan companies. One company was a big bank that offered me less than a smaller bank. So I went with the smaller bank. The banks look at things like credit (check out my post on improving your credit score) , accounts, debt, and income. You will have to submit some paper work in order to qualify for the loan, so you will want to have that in order when the time comes.
Work with a real estate agent
As I mentioned before, a real estate agent can take the details you are looking for in a house and show you houses that match. If you know anyone that’s had a great experience with a certain real estate company or agent, reach out to that person. If you are in Georgia and need an agent, I’d love to help you. Feel free to e-mail me at Loretta.Kartforosh@KW.com
Do a Lot of Research and Ask a Lot of Questions
No, I don’t just mean browsing Pinterest for the colors and themes you are going to implement in your new house. Wait until you actually own the house to do all that. There’s a boat load of terms that you probably have never heard of until purchasing a house. On top of the vocabulary there is also the house buying process that you will learn. If you don’t understand, ask someone you trust or do research yourself. If you know someone who has experience buying houses, reach out to that person. I’ll be the first to admit that even as a homeowner of almost three years, I still don’t understand it 100% and I still call my dad to ask house related questions. That’s okay; it’s an ongoing learning process.
Be Persistent and Patient
I hate to break it to you, but just because you fall in love with a house, it does not mean that house will be yours, unfortunately. I was looking for a house when the market was down, so it was a great time for buyers to find incredible deals on houses that were actually worth much more. Although that meant we could find houses that were listed at amazing prices, it also meant that we were getting out bid multiple times including by investors (cash buyers). I actually looked at and bid on about five houses in the neighborhood I currently live in. Yes it’s frustrating at times. You spend all this time looking, imagining what you would do with the house, filling out paperwork, waiting to hear back, and then you get the news that you lost it. However, you have to keep looking and trying. For my current house, I actually bid around $3500 over the asking price because my real estate agent and dad believed that’s what would help me lock in the deal. All the searching will pay off when you get that call or e-mail that they accepted your offer. Just like that, you become a young home owner!
Now that all the craziness of buying a house is out of the way, you can enjoy the freedom and excitement of owning a home.
Share your home buying experience below!