Am I Too Young To Buy A Home?

Published on July 13, 2018 under First-Time Home Buyers

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It's a rite of passage for many young people: once they graduate high school/college (if they choose to go that route), they go out and find full-time employment, meet a significant other, and start to consider buying their first home.

The process of buying a home begins for different people at different ages, with some being much younger than others.

The real question comes to be: How young is too young for me to be allowed to purchase a home?

The answer to that is largely answered as follows: In the United States, 18 years old is considered a legal adult. Therefore, once you are 18 and have a sufficient stream of income and good credit, you are legally able to enter into legally-binding contracts which can include purchasing a home.

For most young people at that age, once they turn 18, the biggest issue will not be finding someone to provide you a loan, it will be proving that you have a high enough level of income and also a good enough credit history to be able to afford to purchase a home.

In short: for most young people, at 18, the issue is their income and credit history, rather than being able to find an entity that considers someone aged 18 or older old enough to legally purchase a home.

How Can I Achieve Home Ownership At A Young Age?

The real question most people at age 18 will be: How can I ensure that I qualify to purchase a home?

The following are the first steps you will need to accomplish to ensure that you will be approved to purchase a home at a young age:

  1. Having Adequate Income: No matter what your career path is, you will have to prove that you have an adequate income to be able to afford the expenses that come with purchasing a home. Whether you are single or have a significant other, you will have to be able to prove that you make enough money each month to be able to qualify for a mortgage for the home you wish to purchase. You will also have to prove that your stream of income is steady and reliable as most mortgages will require you to submit one to two years worth of pay stubs to prove that you are working consistently and over long durations of time. This ensures that allowing you to get a loan for a mortgage is not "high risk" for the mortgage company.
  2. Have Good Credit Scores: Another vital part of being approved is having at least a decent credit score. For example, to get a loan from Fannie Mae or Freddie Mac you have to have a credit score of at least a 620. For an FHA loan, the minimum credit score required is a 580. Credit scores even higher than the minimums can help you achieve lower interest payments and make your monthly mortgage rates lower as well as ensure that more of what you are paying interest.
  3. Limit Other Debts: Many mortgage lenders will look at all of your income as a debt vs. income ratio. It's recommended that you don't have debt that is more than your 43% of your total income. If you are trying to get a mortgage, paying off other debts first can help you lower your debt-to-income ratio, so getting those student loans, car loans, etc. paid off becomes even more important if you need to get your debt-to-income ratio down to be able to afford that home you want to purchase.
  4. Have A Down Payment Ready: The traditional down payment on a home will be 20% of the final cost of the home (3.5% to 10% for FHA loans). Ensuring you have an adequate down payment ready to put down on the house will limit the amount of money you have to borrow from as a mortgage, making them more likely to approve you for a mortgage loan.
  5. Get Pre-Approved For A Mortgage: Getting preapproved may not GUARANTEE you are able to get a loan for the full amount of the home you wish to purchase, but being preapproved will increase your chances of a mortgage company giving you the loan you need to purchase a home when you find one you want to make an offer on.

Age Is Rarely The Issue - Qualifying For A Loan Is:

Once an individual reaches legal adulthood at the age of 18, age is rarely an issue in getting a loan for a home. The issue is generally qualifying for a loan. This includes having enough income to be able to afford a mortgage payment (and the other costs that come with owning a home) and having enough pay history at a certain level of income to be able to afford the home. Having a qualifying credit score will be another hurdle man young people will face buying a home. Having enough money for a down payment will be another issue.

In all likelihood, once the age of 18 is reached, age is rarely the issue, but qualifying for the mortgage will be the biggest challenge for most young people who wish to buy their first home.

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