How to Prepare at 25 to Buy a House at 35
At 25 years old, owning a home is probably the last thing on your mind.
You probably have other priorities such as paying off student loans, advancing in your career, and, not to mention, keeping up with your social life. However, if you expect to buy a home within the next ten years there are some actions you could take right now to help you prepare for it in the future!
1. Learn How to Budget
Having a budget in mind is extremely important when buying a home. Think about it: a home is a huge purchase, likely the biggest one you’ll ever make, so you want to be happy with it. With that in mind, purchasing a home above your budget can cause serious problems. In order to avoid this, teach yourself to budget now. When you go shopping, have a budget in mind and force yourself to spend below budget. This can go for larger purchases too, like technology and jewelry. It might seem insignificant, but instilling good budgeting habits in yourself now can prepare you for a larger purchase down the road.
2. Pay Down Loans
It’s important to be as debt-free as possible when purchasing a home. This takes a while, so it’ll be in your best interest to start paying down debt sooner rather than later. Minimize or extinguish your student loan debt, and pay off any other loans (such as for a car or credit card). Take a certain percentage away from your income (after paying fixed expenses) and use that to pay certain debts. This may mean sacrificing other personal expenses, but being debt free in the end is definitely worth it.
3. Start Saving
You may think that it’s too early to start saving but keep in mind saving money doesn’t happen overnight. Buying your first home is a huge expense and it’s never too early to start saving for it. First, make sure you have a reliable income source. Whether you have a bachelor’s degree or are working towards a higher degree in grad school, it’s important that you find a job that will give you a sufficient income. This means enough money to pay your fixed expenses and extra to put away into a savings account. It’s understandable that you’d want to spend your extra money on other personal purchases, but try to remind yourself of your goal and commit to putting away a certain amount each paycheck. Try setting up a direct deposit of a certain amount, even if it’s only $50, into your savings account each paycheck. This way, you don’t even miss the money you are putting away!
4. Build Up Your Credit Score
Having a great credit score is extremely important when purchasing a home. First off, make sure you know your credit score and are familiar with your credit report. Annualcreditreport.com gives you your credit report from all three credit bureaus for free once a year. Credit Karma will also give you a free score and report from two bureaus, Equifax and Transunion. It’s important to check this in order to avoid unexpected surprises on your report. For example, what if you had a loan you forgot to pay because you never received a bill? Or what if an identity thief had opened tons of credit cards under your name? You can prevent all sorts of credit score disasters just by keeping an eye on your credit report.
When it comes down to it though, your biggest ally in saving for a home is compound interest. The earlier you start to save and prepare, the more money you’ll have to play with once the time to buy comes. Do whatever you can today to start a savings program for yourself. Believe me, there’s no such thing as too soon when it comes to saving for life’s big expenses!