Taken from an article by Michael De Groote (Desert News)
24-Year-Old Staci Buys her First Home
Staci was 24 when she bought her first home in a central Denver neighborhood back in 2010. She took the real estate plunge partly because she worked at a real estate company called Homefinder, now 8z.com, where she still works in marketing.
“It was not quite as intimidating because of my work in real estate,” she says. “So I started punching around the numbers and a lender prequalified me. I thought, maybe this can really come true.”
But maybe the biggest reason she bought a home was because she felt prepared to buy one. She had a good job, and she had saved a down payment. Other 20-somethings, however, are struggling with student loan debt and may wonder how and when they will be able to afford buying their own place.
The most recent NAR Profile of Home Buyers and Sellers said the median age of first-time home buyers is 31, with a median income of $61,800. Most of these buyers purchase a 1,600-square-foot home at an average price of about $154,000. Staci’s home was built in the 1940’s, and had 2 bedrooms and 1 bathroom.
“I was really first of all my friends to buy a home,” she says, “but pretty soon, other friends started looking, too.” She says that now more than 1/2 of her friends have followed her lead, and bought homes.
First Things First for Young Homebuyers
To stay out of trouble, experts say that first-time buyers need to look carefully at their finances, employment, and long-term plans.
Gene Natali in Pittsburgh, co-author of a book on the subject, said people need to carefully assess whether they can afford to buy a home. “If you can’t afford to put 20 percent down, you can’t afford to buy that house,” he says. Although FHA loans don’t require that much down, Natali holds firm on his position, particularly when considering all the other costs of a home.
Natali said his first home’s water heater went out in the first year. “I had no idea how much they cost.” So he said people should not take the highest mortgage amount they qualify for as their purchasing target, but shoot lower to give themselves some financial room to maneuver.
Patrick Ruffner, a relocation manager, says there are many costs of homeownership a buyer must take into consideration in addition to the mortgage. These include annual property taxes, homeowners insurance, utilities and upkeep of the home.
Getting the Down Payment
Staci was able to put 20% down on her home for two reasons. One, her parents helped pay for her education, allowing her to graduate from college without a lot of student debt. Two, she saved carefully once she got her first job out of college.
John P. Evans, a sales associate., says that student loan debt is causing many 20-somethings to delay buying a home. “It’s not just making the monthly payments on a student loans that hurts. Some young people have actually defaulted on these loans, hurting their credit. They’re waiting to buy a home until they get themselves into a better financial position.”
When Staci got her first job out of college, she lived as if she were still tight on money and put the rest away. This enabled her to have a 20% down payment, which lowered her monthly mortgage payment in turn. In fact, she’s now purchased a second home, and rents it out at a good profit.
Stability and Buying a Home
Another thing to consider is stability. People shouldn’t buy a home if they are planning on moving within three years. If your company has a history of relocating people, or you plan to make a change in location in the near future, buying may not be your best option.
But uncertainty is part of being in your 20s. When you’re older, you have a little clearer vision of how the future looks and how long you will be somewhere. 20-something people have the uncertainty of marriage, children, and career. The older a person gets, the more stable their life becomes. Yet buying a home creates stability. Nothing gives you a sense of independence and security quite like buying a home.
Home ownership is still a big part of the American Dream for most people, yet many young people today don’t think of homes primarily as a status symbol. “They are a pretty practical generation,” Natali says.
