Top Considerations for Buying a Home At Any Age
Buying a new home is a big decision no matter your age or life stage, but what you need in a home can change with time. Of course, there’s no way to predict just what your life will look like in five or 10 years, but planning for the future you hope to have is always wise.
Whether you’re in your 20s, 30s or 40s and you’re buying your first home, or it’s time to up or downsize, these tips can help you make an informed decision for your new home purchase.
Tips for 20-Somethings
Take steps now to set yourself up for future financial flexibility. Take a hard look at your income and make a budget that allows you to pay down debt, cover your bills and put money away in savings. Are you making enough at your current job to accomplish these three basic goals? Do you have any left over for fun? It may be time to consider a job change, ask for a raise or take on a side gig. Once you’ve paid off debts, putting away money for a down payment is the next essential step. But keep in mind that in addition to down payment, you’ll also want to have a financial cushion for unexpected costs such as repairs, maintenance and more.
Stop the rent race. Once you’ve saved up at least $5,000 to $10,000, stop renting and buy your first house. Many young adults believe homeownership is only for established professionals, couples or families. But the sooner you can get out of a rental and start building equity, the better off you’ll be in the future. Sure, renting is convenient, but it’s also costing you as much — if not more — than you’d spend on a mortgage. With an FHA loan, you’ll only need to put down 3.5 percent and some conventional loans may allow for as little as five percent down. Bonus if you can find a home you love with a little equity built-in, such as a foreclosure or short sale.
Check your credit report. You may know your score, but when was the last time you took a look at your credit report? You can obtain a free credit report each year from each of the three bureaus, Equifax, Experian and Transunion. Get yours at AnnualCreditReport.com. Look for any errors on your report, such as collection accounts and bad debts that belong to someone else. In some cases, credit agencies may mix credit files with another individual, but this is their mistake to fix. Do not pay a credit-repair company to clean up someone else’s mess. While it will take some of your time, contact the credit bureau to report the discrepancy and request it be removed from your file. The last thing you want is to apply for a mortgage only to find out your credit report has an error on it by no fault of your own.
Get prequalified early. Prequalification is a simple first step you can take to find out approximately how big of a loan, and at what interest rate, you might qualify for. Getting prequalified can identify any credit problems you may have so you can resolve them early. It will also save you time house hunting as you’ll only look at homes in your price range. Offers from buyers who are prequalified are more likely to be accepted than an offer from a buyer who is not. Completing the prequalification application takes only a few minutes and in most cases, you’ll have an answer by the end of the day. No additional documents are required and there are no fees or costs associated with prequalification.
Consider a new-build home. Don’t assume a new construction home is out of your reach simply because you are young or a first-time homebuyer. There are many advantages to considering a newly-built home. New construction homes require less in maintenance and should not require major improvements or repairs for years to come. They also come with a warranty to cover problems that may arise in the first year, while foundations are typically under warranty for 10 years. Home insurance is also often less expensive on a newer home. Many home builders will offer to cover closing costs when their buyers choose their preferred lender.
Make a long-term plan. While the home you buy in your 20s may not be the home you stay in for life, if you want to make a profit when you sell, choose a home you can see yourself living in for at least five years. Hoping to get married or have children? Consider your future hopes and dreams when you purchase your first home. All though you may not be able to have every feature you’d want in a home later in life, look for something that allows you and your life to grow and change a little.
Tips for 30-Somethings
Reevaluate your lifestyle and priorities. What has changed in your life since your 20s? Is it time to upgrade to a larger home to make room for your growing family? If you have children, considerations should be made for school district and access to major amenities like grocery stores, doctors’ offices, hospitals and schools.
Exercise restraint with a ‘fixer upper.’ Purchasing a home in need of upgrades can be an exciting challenge for many home buyers in this life stage. But be sure that any improvements made to your home don’t exceed those of the average home in your neighborhood. Go overboard on improvements and upgrades and you may not get that money back when you sell if it is beyond the value of the area.
Tips for 40 and 50-Somethings
Think about a downsize. Are you an empty-nester or close to it? If you’re on the verge of a new stage in life, downsizing your home to a smaller, more manageable home can give you the freedom to enjoy traveling and the experiences that come with this life stage. Downsizing will generally lower your mortgage payment and can help reduce monthly expenses freeing up more money for your retirement, upgrading your home, traveling and more.
Consider ways to pay off your mortgage. If you have extra cash each month, putting more toward your mortgage may be a smart financial move for you. Refinancing to a shorter term loan may be another option. Of course, when you pay off your mortgage, you’ll miss out on some of the tax benefits, so be sure to talk to a financial advisor to determine the best move for you.
Buying a home is a process, but comes with many benefits, no matter your age. Whether you’re ready to take the leap from renting to homeownership, need to upsize for a growing family or are ready to downsize and enjoy retirement, PrimeLending can help you secure the financing for your dream home. Contact a Loan Officer in your area today to get started.