5 Things To Do In Your 20s So You Can Buy a Home In Your 30s
Twenty-somethings are often under the impression that they’ll never be able to own a home, but, of course, that’s not always the case. A lot can change in a few years, so while you may not be in the market to buy a home this year or next, the (slightly) more distant future is still a possibility if homeownership is what you want. If you’re hoping to be a buy down the road, here are a few things you can do now to make the process easier when the time comes.
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Work On Your Credit Score
In most cases—although there are always exceptions and programs for those who don’t—you will need a good credit score in order to buy a home. Your credit score isn’t something that can be fixed overnight, so if you’re looking to buy a home in the future, now is the time to start taking action and making changes if your credit score can use some improvement. Your first step? Get a full copy of your credit report so you can see where you need to make changes—and double check for any mistakes in your credit history that could be bringing your score down. From there, work on making payments on time consistently and lowering your balances as much as possible. According to Experian, delinquencies and other public records (late payments and the like) stay on your credit report for 7 years, and hard inquiries that drop your score slightly (like when you lease a car or apply to rent an apartment) take two years to come off your credit history.
Open Another Line of Credit
Along with raising your credit score—and this part should help you do that, too—look at how many open lines of credit you have. If you’ve only ever had one credit card, it might hurt your chances of getting approved for a loan. According to Zillow, for renters looking to buy in the future, multiple lines of good credit are better than just one (by the way, student loans and other types of loans count towards this, so be sure to factor those in, too). Consider opening another credit card—so long as you’re careful about using it and paying it off, it’ll bump your credit score up too. Since it takes time to build credit and for new lines of credit to show up on your credit score—and since opening a new line of credit can temporarily drop your credit score a few points until it ultimately goes back up—now is the time to open those additional accounts so that everything balances out and you’re all set when it comes time to actually buy your first home. Of course, don’t just open a bunch of accounts at once—Experian notes that you should only open new accounts as needed, so be thoughtful about the ones you apply for.
Open a Separate Savings Account
…and then start adding to it whenever you can. It takes time to save up money for a down payment, and you’ll want to keep that money in a place that’s safe and out of sight, so you won’t be tempted to use it in the meantime. But of course, saving money isn’t exactly easy, especially when you’re saving up for a down payment that’ll easily add up to tens of thousands of dollars. If you need help to get started, Forbes asked financial advisors and experts for their best tips for saving up for a down payment. Their advice? Try automating your savings so it comes out of your paycheck before you even have a chance to use it, turn saving into a game or a challenge, put any unexpected money (think tax returns or work bonuses) into your down payment savings right away, and more. Find a savings solution that works for you, and work on slowly building it up over time before you’re actually ready to make your move.
Take a Homebuyer Education Course
If you plan to apply for a down payment assistance program, it’s likely that you’ll have to take a homebuyer education course to qualify, according to US News. But, that doesn’t mean you should only take the course if you’re mandated to—it can actually be a really helpful option for all first-time homebuyers regardless. US News notes that homebuyer education courses cover topics like the mortgage process, budgeting, the home inspection process, insurance, and how real estate agents work. Financial experts say they’re helpful for prospective homebuyers at any income level, even if they’ve bought a home before. So, look for a reputable class in your area or online—some are free, while others may charge a small fee, in which case, it’s a small price to pay to learn the ins and outs of the home buying process and make sure you’re totally prepared when the time comes.
Figure Out What You Need
This is less of a financial strategy and more about investing some of your “right now” time in your future happiness. While you’ve still got plenty of time to go before you actually buy your first home, use that time to your advantage to really hone in on what it is you want—and more important, what you need out of your future home. What kind of neighborhood do you want to live in? Do you or will you have kids and how will that effect where you go? How many bedrooms and bathrooms do you need—and what about access to an outdoor space? What features are important to you (as in, do you cook a lot and would you regret putting all of your money into a home with a tiny kitchen?). And what about your commute to work—can you really take an hour train ride just to have a little more space? Be realistic with yourself, visit neighborhoods you’re interested in, and think long and hard about what it is that matters to you (and anyone else you might live with) in your future home. Future You will appreciate it.