A Guide On How To Buy A House In Your 20s

It may come as a surprise, but like themed charcuterie boards, homeownership is a growing trend among millennials and Generation Z. According to the National Association Of REALTORS^® (NAR), younger millennials made up 70% of first-time home buyers in 2023. And Gen Z has entered the group chat, making up 10% of home buyers in 2022.

But no matter how easy TikTok and YouTube can make buying a house look, there’s still a lot to break down.

We can help you figure out what you need to know about buying a house in your 20s – including that it’s totally doable – and help you explore the pros and cons of life as a younger homeowner.

Should You Buy A House In Your 20s?

You shouldn’t dive into the housing market until you know you’re ready. Buying a house is probably one of the biggest purchases you’ll ever make. It isn’t a decision to make lightly – and it won’t happen overnight. You should carve out time to reflect on your lifestyle and establish your future goals.

If you’re renting, weigh the pros and cons of renting versus buying. If you want to trade in the 9-to-5 life to travel full-time or plan on moving to another state in 5 years, homeownership may not be the right fit right now. But if work and your career prospects feel stable and secure, now may actually be the perfect time.

How To Buy A House In Your 20s

Buying a house is a big milestone that requires comprehensive planning. Let’s explore the steps to consider when buying a house in your 20s.

1. Evaluate Your Finances

When you’re ready to buy a home, your first step should be to put your finances under a microscope and evaluate your financial health. Look at your finances from every angle, including:

• Checking your credit: One of the most important numbers on your mortgage application will be your three-digit credit score. Your credit score will affect your mortgage rate and signal to a lender how likely you are to pay back your home loan. A higher credit score can make it less expensive to borrow money and unlock better loan terms, saving you money over the life of the loan.
• Reviewing your income and expenses: Mortgage lenders review several factors to determine mortgage eligibility. One of those factors is income, including how much of it goes toward your monthly debts and what your debt obligation would look like with a mortgage added to it.
• Taking control of your debt: Many millennials and Gen Zers carry some debt. The usual suspects are student loans, credit card debt and car loans. Not all debt is bad debt, but it’s still important to manage your debt responsibly, especially before buying a house. A lower debt obligation shows lenders you know how to manage debt and can likely handle additional debt, like a mortgage payment.
• Establishing a budget: We can’t stress enough how important it is to budget for a house. Buying a house involves many upfront costs. Then there’s the cost of homeownership. You’ll need to make sure you have enough savings to maintain your new home and cover your monthly mortgage payment.

2. Save For A Down Payment

A down payment is a critical part of buying a house. It’s the percentage of a home’s purchase price and gets paid upfront at closing.

You may have heard that you must make a 20% down payment. While a 20% down payment has its benefits, the percentage you put down will vary by lender and loan type. In 2023, the average down payment for first-time home buyers was actually closer to 8%.

Since more than half of home buyers use their savings to cover their down payment, its critical you start building your savings early.

Here are some of our best tips on saving for a down payment:

• Open a high-interest savings account for the down payment
• Set up automatic transfers of a certain amount per paycheck into your down payment savings account
• Take advantage of gift money or use inheritance money
• Earn extra money with a side hustle, like affiliate marketing, dog walking or selling goods online or at local markets
• Cut down on spending where you can
• Take advantage of down payment assistance and first-time home buyer programs

How long it will take to save for a house will depend on several factors, including your down payment goal and income – and your dedication to buying a home.

3. Research Your Loan Options And Get Preapproved

While some first-time home buyers can buy a house all cash, a mortgage is the most popular way to buy a home. There are many mortgages to familiarize yourself with, including:

• Conventional loans: Conventional loans are the most common type of home loan for home buyers, offering low down payments and flexible loan terms.
• Department of Veterans Affairs (VA) loans: VA loans are available to qualified active-duty service members, veterans and surviving spouses and have less stringent eligibility requirements than conventional loans.
• Federal Housing Administration (FHA) loans: FHA loans are popular with first-time home buyers because of their lenient financial and credit score requirements.
• U.S. Department of Agriculture (USDA) loans: USDA loans are available to buyers in qualifying rural or suburban areas.

Once you’ve found the right lender, get a mortgage preapproval to get a ballpark estimate of your price range to buy a home.

A preapproval also shows sellers your offer is legit. The confidence boost a preapproval gives sellers can give you an edge when you make an offer, especially in a fierce bidding war.

Mortgage Requirements To Buy A House

Mortgage requirements will vary based on the lender and home loan program. Here are some standard requirements for mortgage qualification:

• Minimum down payment: Most conventional lenders require a 3% down payment for first-time home buyers and 5% for repeat buyers. FHA loans typically require 3.5% or 10% down, depending on a borrower’s credit score.
• Credit score: Conventional loans typically require at least a 620 credit score. FHA loans usually require a credit score of 580. With a 760 credit score or above, you’ll probably qualify for better interest rates and more favorable loan terms for any loan type.
• Debt-to-income ratio (DTI): DTI compares your monthly debt obligations to your gross monthly income. Most lenders consider a DTI ratio of 43% or less healthy and favorable for a loan.
• Income: Lenders also consider your income and assets to help ensure you can make your monthly mortgage payments.

From the initial application to closing, it takes about 30 – 45 days to complete the mortgage process.

4. Set Realistic Home Goals

Your first home doesn’t have to be your forever home. But you should prioritize finding a home that caters to your needs in a neighborhood that matches your lifestyle.

Many younger home buyers dream of living in a move-in ready smart home in a trendy, walkable neighborhood. While some first-time buyers can make that dream a reality, here are a few key questions every would-be homeowner should answer before deciding where to live:

• What type of home do you want? A condo, townhouse or a single-family home?
• What neighborhood or area do you want to live in?
• How far or close do you want to be to family, friends or work?
• What amenities do you want in the home or the neighborhood?

Creating a list of must-haves and nonessentials can help guide your house hunt and help you communicate more effectively with a real estate agent.

5. Find The Right Real Estate Agent

Working with a real estate agent can make a huge difference in your home buying journey. Real estate agents do so much more than find properties for you to tour.

Agents can help you understand the trends in your local housing market – like pinpointing the up-and-coming neighborhoods. They can also help guide negotiations with sellers, complete paperwork during closing and much more.

The right real estate agent can be a game-changer for your home buying experience.

6. Enjoy The House Hunt

Down payment saved? Check! Preapproval letter in hand? Check! A trustworthy real estate agent by your side? Check! Now, it’s showtime.

Everyone has their own idea of fun, but attending open houses and browsing online listings tends to top the list as the most enjoyable part of home buying. So, don’t forget to have fun.

When you find the right home, work with your agent and use their negotiation skills to submit an offer that catches a seller's attention. Once your offer is accepted, you’re one step closer to becoming a homeowner.

Pros And Cons Of Buying A House In Your 20s

Many people dream of becoming a homeowner. And while homeownership comes with responsibilities and risks, it also offers incredible rewards. Let’s go over some pros and cons of buying a house in your 20s.

Pros

Becoming a homeowner at a young age is a huge milestone that can offer more than a place to call your own. Here are some benefits of buying a house in your 20s:

• Start building equity and wealth at a younger age
• Free to personalize your space without a landlord's permission
• Potential tax deductions and credits
• Positive impact on your credit history with on-time monthly mortgage payments
• Predictable monthly mortgage payments with a fixed-rate loan
• Sense of security and accomplishment for reaching a milestone

Cons

Having a place to call your own is a reward – but it comes with many responsibilities. Here are a few factors to consider before buying a house in your 20s:

• Less freedom to move at will
• Responsible for maintenance and repairs
• Upfront costs, such as the down payment, closing costs and moving costs
• The cost of owning a home may exceed long-term renting
• Risk of mortgage default or foreclosure

Buying A House In Your 20s: FAQs

Do you still have questions about buying a home in your 20s? Let’s go over some common frequently asked questions.

Should I buy a house in my 20s?

Buying a house in your 20s will depend on your present and future goals.

If building equity and investing in your future now are high priorities, becoming a young homeowner can make sense. If you plan on returning to school, quitting your job to travel or have high levels of debt – buying a home in your 20s may not make sense.

However, you aren’t stuck with a mortgage and no options if you buy a home and experience a significant lifestyle change. You can sell the home or generate rental income by exploring how to Airbnb your property.

What is the most common age to buy a house?

The average age of a first-time home buyer is 35, and it’s 58 for repeat home buyers. However, buying a home is a big decision that doesn’t need to happen at any age or time besides the right time.

How do I know if I’m ready to buy a house?

No matter what decade of life you’re in, buying a home is a significant decision that will rely on your finances, lifestyle and existing market conditions. Reflect on these factors to increase confidence in your decision to embark on your homeownership journey.

How much should I put down as a first-time home buyer in my 20s?

The minimum or required down payment amount will depend on your financial situation, loan type and the lender's requirements. Research first-time home buyer programs in your area to help lower or cover your down payment and discuss your best approach to your down payment with your mortgage lender.

Are there any programs or incentives for young home buyers?

Yes, first-time home buyers can benefit from home buyer courses, grants and loan programs.

If you’re still paying off student loan debt, a handful of states offer student loan forgiveness and repayment assistance to first-time home buyers. Discuss the programs in your area with your real estate agent.

The Bottom Line

Being a homeowner in your 20s gives you more time to invest, increase your home’s value and build wealth from the equity in your home. With the right lender on your side, you can confidently start the journey to homeownership. Start the mortgage approval process today and take one step closer to owning a home!