Here’s How to Buy a Home in Your 20’s Without Going Broke

It never ceases to amaze me how surprised people are when I tell them that I'm unmarried and I own my home. I was car shopping this past weekend, filling out the requisite paperwork and the sales guy asked a few casual questions.

“Rent or own? You rent your home, right?”

“No, I own.”

“Oh.” He said with a look of surprise and checked off the “Own” box on the credit application.

I'd argue that nowadays (especially with the abundance of millennial related real-estate articles on the internet) many millennials are forgoing home ownership for two reasons.

One: they wait until marriage because at that point they probably have a better idea of where they want to live, stability in the workplace, etc. Two: They value low key, low maintenance lifestyles and homeownership often doesn't fit this value point.

My feelings on that particular point are enough to fill up another post for another day, but since I get the question a lot, I thought I'd finally lay it all out: how to buy a home in your twenties (I did at the tender age 26) and doing it when you don't make a lot of money (I was making less than $40k a year when I applied for my mortgage.)

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How to Buy a Home in Your 20s

Know Where You Want to Live

I moved off to New York at 23. After two years in the city, I wanted to move back home to Georgia, and not just for the interim.

Having had the experience of living far away from home was an amazing thing, because it taught me what I did and did not want.

I knew that moving back south was (most likely) for the long haul, so I felt comfortable with the decision to put down some official, and expensive, “roots.”

Even though buying such a large home without thinking about shifting circumstances is something I wish I'd done differently, I don't regret the action of buying the home.

I would have bought purchased something either way, because as I said, I knew Atlanta was where I wanted to live for the long haul. After you hone in on where you want to lay down roots, it's time to roll up your sleeves and figure out how much you can afford.

Shore Up Your Credit

Twenty-somethings may have low (or no) credit which means you'll have a hard time getting approved for a mortgage. For those who have no credit, try opening up a credit card with a small limit and paying it off every month. For those with established credit, be sure to review your credit report, keep your balances at 30% or below your credit limit, and pay all balances on time.

Click here to check your credit for FREE with Credit Sesame!

Get Pre-Approval for a Mortgage

You can't seriously shop without knowing how much home you can afford, but getting pre-approved for a mortgage is actually super easy. I like this Bankrate calculator to play with the numbers to see how your monthly payment would be affected depending upon your interest rate and money down. You can get pre-qualified with any lender, the bank you have your checking and savings accounts with, or with specific home lenders.

You should also be aware of the types of loan products. Many first-time buyers can qualify for an FHA loan (and only put 3.5% of the purchase price down) and having a lower down paymentΒ helps alleviate a lot of the financial barriers to homeownership. Also don't be afraid to rate shop. We like to recommend LendingTree for this, which you can visit by clicking the link below.

To shop mortgage and home loan interest rates with zero hassle or commitment click here.

Aggressively Save for a Set Period of Time

Okay, so you know how much you can afford for a mortgage, but what about a down payment? If you don't have large nest egg or a gift from family members, it's time to start trimming the budget and start saving aggressively.

Right around the time I moved home, I started this blog, and subsequently started reading a mountain of personal finance blogs and articles.

Opinions differ, but for the most part the consensus is that buying real estate can be a great way to increase your net worth and maximize your dollars (since essentially when you own, you're paying for something to keep for the long haul, or “paying yourself.”)

  • Before leaving New York I received a final bonus payment from my old job, (to the tune of 16k) that comprised a large chunk of my savings.
  • Even though I was making under 40k at my first job in Atlanta, when I was ready to get serious about home buying I steadily saved 20% of my paycheck since I didn't have any credit card debt at that time.
  • I also was making a little money from my blog side hustle at the time and was putting a good portion of those funds away as well.

By the time I went to purchase I had about 10 of that original 16k left, plus the few grand I'd managed to save up from work and side hustling and it only took me about six months to get to that point.

When you don't make a lot, it is easy to dip into your savings to fund trips, gifts, holidays, etc.

I could have been more frugal, but since I wasn't putting that money on the cards like I used to, I considered it a win.

New apps likeΒ Qapital rounds up your purchases to the next even number and “saves the change” for you…automatically. I saved $75 my first month with Qapital and didn't even lift a finger, so I highly encourage you to give those a try– it really adds up!

I also like to make some quick cash by filling out surveys in my spare time. Here are the ones I like!

Research and Leverage Down Payment Assistance

One thing I did do right in my first home purchase was that I researched the crap out of every down payment assistance and grant program that I could find. In 2013, the city of Atlanta was offering $15,000 in down payment assistance grants to first-time homeowners who purchased foreclosures in certain neighborhoods.

It was a good bit of paperwork, but in return I received $15,000 in down payment assistance. It's a “soft loan” which gets forgiven a little bit each year. I also could use the money however I chose–for down payment, principal or both. I only had to pay $1800 at the closing plus the $500 in earnest money.

Do Your Homework

It wasn't just the down payment assistance that led me to this particular home. Having worked for a hedge fund, I knew a little bit about how and why to do research, otherwise known as due dilligence, on a house.

I drove by this particular house several times before I was under contract:

  • at night
  • during the day
  • in both the morning and afternoon rush hour (to gauge traffic)

I read press releases and news articles on activity in the area and dig a lot of google digging. I spent time in the neighborhood, in the parks, I went to the neighborhood association meeting (if you're looking to buy in an “up and coming neighborhood” make sure it has an active neighborhood association, this has made all the difference when it comes to my comfort level and outlook on my neighborhood.)

Attending the NA meeting allowed me to hear about projects in the works for our area. A new city library is already under construction two blocks from my home, the school on my block has reopened, and a police precinct is planned for later this year.

This way nothing can surprise you once you move in!

Don't Buy More Home than You Can Afford

This is probably the biggest key to being a twenty-something homeowner. When you have a lower 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. Homeownership is smart–but can be expensive if you don't prepare.

And remember: Just because they approved you for an amount doesn't mean you have to buy up to that limit.

Homeowners may also consider roommates or purchasing a fixer upper to try and make homeownership an even smarter money move.

Like this post? Get more first time home buying information in my book, The Millennial Homeowner: A Guide to Successfully Navigating Your First Home Purchase, now on Amazon. Click here to get your copy!Β 

I bought a house at 26 making only 36k a year. Definitely tough, but you can do it. Here are some tips on how to buy a home in your 20s. It can be done!

 

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  • Ashley Ann Michele
    May 31, 2016 at 5:27 pm

    Do you mind sharing how much your home was?

    • Lauren Bowling
      May 31, 2016 at 6:51 pm

      65,000 for a foreclosed home in Atlanta in 2013. Thanks for commenting!

      • Ashley Ann Michele
        May 31, 2016 at 8:05 pm

        Wow! That is a great price. I am looking to relocate to GA, either Gwinnett or Dekalb county, from NY and I’m looking to buy a townhouse. If I can find a forclosure at that price, I will practically jump on it! Congratulations on your purchase (even if it is 3 years later)!

  • K. Sequeira
    August 5, 2015 at 8:34 am

    LBee, thanks for the insight. I’m 26 and looking to buy a home next year (I looked 2 years ago, but just didn’t get that gut feeling), so now I’m coming back with $15K more savings. I would love to know – what are your thoughts on putting less than 20% down? I’ve been determined to do that, but everyone else I talk to feels I’m putting off buying for renting when I could have afforded the house I wanted at 10-15% down.

    Thanks for the insight!

    • Lauren Bee
      August 5, 2015 at 9:51 am

      Hi K. – great question! Here’s an article I contributed to on yahoo finance that suggests many compelling alternatives to 20% down.

      I think 10-15% down is still a GREAT amount, especially given many first time buyers get away with 3-5% (I myself put down 3.5%) I have to pay $127.00 per month in private mortgage insurance for not being at 20% equity in the home, which adds up every month, but running the numbers with the PMI included, it is still cheaper for me to own than rent.

      Not sure what area you live in, so run the numbers for yourself, but I (personally) think it is okay to go in with less than 20% down. You could put in less than 20% and save the additional cash for taxes, home repairs, furniture…there are a lot of home expenses many first timers (myself included!) did not expect.

      Hope that helps!

  • Lisa
    November 18, 2014 at 6:41 pm

    I bought a house in my early 20s under much different circumstances (to save my mom during an ugly divorce/foreclosure). I didn’t expect/want to own a house at the time, but now I’m very grateful for the experience. If I had to do it again, I’d save up a lot more since closing costs/furniture are not cheap!

  • Sara
    November 18, 2014 at 5:07 pm

    A friend (in Chicago) just bought his parking spot for that much. I don’t understand how home prices are so moderate in Metro ATL. Actually, if you have any links, etc that explain I’d love to read. I’m a total urban planning nerd!

  • Michelle
    November 18, 2014 at 3:52 pm

    Good job on your first home purchase! I also get the surprised look when I say that I own. It gets on my damn nerves…but, that’s for another day.

    • Lauren Bowling
      November 30, 2014 at 8:30 pm

      Right? It’s weird. I think it’s the single woman part more than being young. Let’s vent!

  • Broke Millennial
    November 18, 2014 at 12:13 pm

    It’s amazing how many people “my age” are starting to buy homes. It’s sort of giving me the bug. Unfortunately, you can’t take advantage of those first-time home buyer gigs in most states unless you plan to actually be the one living there and not renting it out. I’d have to commit to leaving NYC in order to buy a property.

    You have some really great tips in here I never would’ve thought of, like going to the Neighborhood Association meeting. I’ll be phoning you up when I finally decide to buy!

    • Lauren Bowling
      November 18, 2014 at 12:55 pm

      Duh. Anything for you, bae. I’m surprised to hear you may not be committed to NYC for the longer term πŸ™‚

  • The Stoic
    November 18, 2014 at 8:11 am

    Kudos for a well planned house purchase! I know you’ve had doubts about your decision to purchase in the past and you may have doubts in the future, but in the final analysis I think you will find it was one of your best financial moves. To do so at 26 is truly an accomplishment. Great work LB!

    All the best,
    The Stoic

    • Lauren Bowling
      November 18, 2014 at 12:54 pm

      You always manage to come in, comment, and make me feel good about my choices. I truly cherish you, Stoic! πŸ™‚

  • Bridget
    November 17, 2014 at 11:10 pm

    The fact that houses are even priced at $65K is something I can’t wrap my head around.

    Even though you were making “less than $40,000”, the house is still ~1.5x your income. A unit in my condo complex is more than 3x my gross income =\

    You totally totally lucked out.. and I am so jealous I could eat my computer.

    Especially lucky that values going up with neighborhood improvements. You found a gem! Hold on to that thing!

    • Lauren Bowling
      November 18, 2014 at 12:54 pm

      I mean, it was a foreclosed home that pretty much needed to be rebuilt, but homes in Atlanta compared to most places are decidedly cheaper. You can live like a king here, and I know I’m lucky. I’ve debated selling, but I think for the long-term future I will rent until the market maxes out.

  • Lauren @ Cheapstudents.ca
    November 17, 2014 at 7:05 pm

    Thanks for the great article, and definitely some inspiration. I’ve recently moved home after university and want to move out of my parents home within the next 3 years AND own my own home/condo. Great to hear that you’ve done it and had a great strategy as well.

    • Lauren Bowling
      November 18, 2014 at 12:53 pm

      Moving home with the parents can be a great way to save up enough cash for a down payment. Smart move!

  • Jenna
    November 17, 2014 at 2:04 pm

    It’s awesome that you were able to do this.

    For my husband and I, we don’t know where we want to live. That’s our #1 reason for renting right now.

    • Lauren Bowling
      November 18, 2014 at 12:53 pm

      I think that is a perfectly acceptable reason not to buy. Owning a home isn’t a pair of handcuffs by any means, (as you can sell/rent if you need to leave) but it does tie you down in terms of the logistics/finances of moving towns and states.

  • Newlyweds on a Budget
    November 17, 2014 at 1:28 pm

    that is such a great opportunity you had that you worked hard for and took advantage of! And what a great investment!!!

    • Lauren Bowling
      November 18, 2014 at 12:52 pm

      Yes! It was a great investment, one that I hope keeps growing πŸ™‚

  • Stefanie @ The Broke and Beautiful Life
    November 17, 2014 at 11:44 am

    It’s all about doing the homework. Unfortunately, even after doing the homework, I know I can’t afford a place in NYC, and I don’t think it’s my forever place either.

    • Lauren Bowling
      November 18, 2014 at 12:52 pm

      I almost…almost used my windfall to purchase a $150k 2 BR condo in the dodgier part of Harlem hoping it would eventually gentrify. I didn’t because I had doubts about staying in NYC. I looked it up and that building has homes listed for over $250 now!

  • Money Beagle
    November 17, 2014 at 11:33 am

    I bought my first place when I was 24. It was just a small condo and the mortgage wasn’t much more than I’d been paying in rent, but looking back, it was a pretty big deal and it was only possible because I saved, budgeted, and thought ahead to the future.

    • Lauren Bowling
      November 18, 2014 at 12:51 pm

      I think your last sentence sums it up perfectly. Thanks!

  • Jayson @ Monster Piggy Bank
    November 17, 2014 at 4:13 am

    I am also surprised as well! Never thought that around 20-year lady could manage to buy a house. Thanks for sharing your experience. If I could turn back time, I’d like to aggressively save money like the one you did!

  • Melanie @ My Alternate Life
    November 17, 2014 at 1:39 am

    Thanks for sharing your homeowner story! I do think it’s impressive you have a home at such a young age. That’s so rad the value of your house has doubled! You were also very smart to attend NA meetings and also see what the neighborhood is like at all hours. I’m not interested in home ownership as of now, as I foresee myself moving a lot.

    • Lauren Bowling
      November 17, 2014 at 10:38 am

      I think it is great that you know what you want and what you can/can accomodate. Sometimes I get a little stressed out that I wouldn’t be able to pack up and move in an instant, but those worries are few and far between.

  • Anne @ Money Propeller
    November 17, 2014 at 12:26 am

    Doubled? Even if that’s an over estimate from zillow, if it’s half that you’re doing awesome. Nice work on the neighbourhood association. Are those common in the south? I’ve never heard of one anywhere I’ve lived before.

    • Lauren Bowling
      November 17, 2014 at 10:37 am

      Not sure in the south, but definitely in Atlanta. We’ve got like a crazy amount of neighborhoods within the actual “city” and they all have neighborhood groups πŸ™‚

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