In Your 20s and Thinking About Buying a Home? Here’s What You Need to Know
According to research from realtor.com, more than 70 percent of Gen Z plan to buy a home at some point in the future. And for many, that future is quickly approaching—with 43 percent planning to buy a home in the next five years and 45 percent actively saving for their home purchase.
But buying a home is a major investment—and if you’re considering making that kind of investment in your 20s, there are certain things you need to know.
Credit score. People in their 20s have a lower average credit score than other age groups (according to Experian, people between the ages of 23 and 29 have an average credit score of 660—while people between the ages of 50 and 59 have an average score of 703). A lower credit score can translate to a higher interest rate on a traditional mortgage—so spend some time and effort on raising your credit score as much as possible to ensure you get the most competitive rates.
Down payment. Before you buy a home, you need to build your savings. But how much do you need to save? While you don’t necessarily need a full 20 percent of the purchase price, you do want to have some money stashed away to cover your down payment. Aim for 5 to 10 percent of the home’s purchase price.
Future plans. Your 20s can be a time of change and transition—but if you expect a lot of change and transition in your near future, buying a house may not be the best move. Before you invest in a property, consider your future plans. Where do you see yourself in one year, three years, five years, ten years? If it’s not in your current city or in the home you’re considering, you may want to think twice before putting in an offer. Or consider whether you would hold onto it as an investment and rent it out if you do move out of the area.
So, what does this mean for you? If you’re a Gen Z-er considering buying a home, it’s important to know what factors to take into consideration. That way, when you do invest in a property, you can rest easy knowing that it’s the right decision—for your budget, your life, and your future.
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