A lot of times big life decisions await you when you are 20-something. If one of those decisions is trying to figure out if you should buy a home, you are not alone. But how do you know what you can really afford? … Is now the right time? How young is too young? There’s a lot to think about and we get it, the home buying process can be intimidating and overwhelming.
No matter your age—you need to get prepared ahead of time when making a big purchase, like buying a home. While no one can predict what the future holds, it is helpful to have a plan, so you are better prepared financially and are educated about what is ahead of you. This makes the home buying process much easier. From mortgage to move-in and beyond, we’ve got you covered!
Step 1: Save for a Down Payment
How much money are we talking about here? Ideally, you should aim at a 20% down payment (of the purchase price) when you buy a home so you can avoid paying Private Mortgage Insurance (PMI). We realize this may not be an option for everyone, especially in your 20s and just starting out, or live in an expensive real estate market.
Now’s the time to aggressively save and pay off as much debt as you can. Regularly put money aside for at least 6-12 months before you plan to buy. Just think of it this way—for every dollar you save, the closer you are to reaching your down payment goal and purchasing your first home.
In many states, there are often first-time home buyer Down Payment Assistance (DPA) programs that you can tap into to help get you on the path to homeownership a little faster. As part of your home buying process, it’s important to research DPA programs to know the full spectrum of loan options available to you. Your Churchill Home Loan Specialist is always available to discuss your options to see if a specific DPA program is a good fit for your situation and your long-term financial goals.
Step 2: Find Out How Much You Can Really Afford
It’s always good to get a baseline number before you start shopping for a home. Just because you are approved for a certain amount doesn’t mean you have to buy a home up to that limit.
Ultimately, you want your mortgage payment well within your monthly budget. You want to make sure your mortgage doesn’t take up most of your take-home pay. You still want to have money to put into an emergency fund, savings account, and have cash for furniture, vacations, and to hang out with your friends.
Your debt-to-income ratio (DTI) will come into play when you’re calculating home affordability. Your DTI compares how much debt you pay to how much income you earn each month. For example, you would add up your monthly bills and expenses for each month and divide that number by your monthly income before taxes are taken out. The result is your DTI percentage. The lower your DTI, the better!
Step 3: Learn About Your Local Housing Market & Work with a Realtor®
Home values are rising nationally. But consulting with an expert Realtor® is smart to help you figure out what is going on in your local housing market.
All real estate agents must have a license in the state they are working in and have knowledge of specific real estate laws and procedures. They can help you get in to tour homes quickly, provide virtual tours, and even have access to off-market listings. An agent can also help you negotiate an offer when the time comes.
Realtors® have what is known as a “fiduciary responsibility” to their clients and are legally required to put your best interest first. To put it simply—your Realtor® will always have your back!
So, you may have an idea of what you’re looking for in a new house, but an experienced agent can provide reputable data about the neighborhood, information about area schools, crime rates, and other important factors. Agents are also great resources to help connect you with house inspectors, roofers, contractors, and more.
Step 4: Get Certified and Secured
It’s time to get in the driver’s seat and shop for a home the smarter way.
Once you get three months out from buying a home, you can become a Churchill Certified Home Buyer. This allows you to get pre-underwritten for your home loan before you even go under contract. It’s the next best thing to paying cash for your home and sets you for home buying success to increase your negotiating power for a quick close when housing inventory is tight.
At this point, you’ll also have the opportunity to take advantage of our Rate Secured program to protect yourself from fluctuating interest rates to eliminate stress.
With Rate Secured you’ll be able to:
- Secure a low interest rate at no cost
- Lock your rate up to 90 days while you shop for a home
- Reset the rate for an additional 90 days, if you don’t find a home in the initial 90-day period
As you’re looking for a new home, we know you want the lowest possible interest on your mortgage. Who wouldn’t?
Step 5: Get a Churchill Checkup
After you have closed on your home loan, it’s important to stay in touch with your Home Loan Specialist. Since you’re purchasing a home at a young age, it’s likely you will be experiencing life changes in the years to come.
You’ll want to make sure that your mortgage continues to work for you whether you decide to keep the home as a long-term investment, sell the home later for profit, or decide to pay off your mortgage and live debt free. That’s where the Churchill Checkup comes in. We can help you explore your options, guide on your next steps, and make sure you are getting the most for your money.