For young adults just out of school, buying a home is a great opportunity to build wealth and to build your credit. With your initial salary, it may be tough to afford a mortgage and with minimal savings, it could be tough to get approved for a loan. Here are some helpful tips to make it happen…
Getting Approved For A Loan
- Save During College: If you are still in college, get a job and start putting money away. Even a couple thousand dollars may be the difference between getting approved and not getting approved.
- Get A Partner: Purchasing your first house with a good friend is a smart idea. By splitting ownership, the hefty down payment could be more affordable.
- Get A Private Loan: If you think the property could be a good investment, consider presenting your case to a family member for a private loan to help with the down payment. You may be able to convince your relative to not charge interest but instead receive a part of any gains made on the house on the back-end.
Affording The Monthly Payments
After you have been approved for a loan, your next step is budgeting to pay your monthly payments. Unfortunately, in most cases, your monthly payment will also include taxes and insurance which seems to make many properties transition from affordable to un-affordable. Here are some ways to make the payment less painful.
- Interest Only: Depending on the rates and the environment, it may make sense for you to do an interest-only loan. This can help keep the payment down. This should only be your option if you are sure you will not be in the property longer than a few years.
- Find Renters: Make sure your friends have secure jobs and will be able to pay you each month. Avoid freeloaders. Also, consider drafting basic lease agreements to protect yourself.
Position Yourself For The Future
Eliminating debt and putting money away are the basics of positioning yourself. Owning a home at a young age may be an opportunity to continue this process. While your home is unlikely to double in value and you probably won’t pay off much of the interest, you will be investing in an asset and building your credit at the same time. Furthermore, you can take advantage of the tax breaks that home ownership brings.
Being a homeowner for the first time is a great learning experience. You are forced to learn to take care of something and take pride in something you own. You will learn the process of getting a loan and closing a large transaction. It is a great value and learning experience.
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