How to Save for a Home in your 20s and Early 30s

How to Save for a Home in your 20s and Early 30s

We all know rising housing, education and healthcare costs are putting home ownership out of reach for much of the younger generation. In 2018 the general consensus is that home ownership is out of reach for many people in their 20s and 30s.  While we know not all in the younger/millennial generation want to own a home, and many are spending their time travelling the world, if owning a home is part of your dream, we are here to offer some tips to help you save up for the home of your dreams.

1. Think about what kind of home you can ACTUALLY afford. Be realistic. Do not choose a home that will cost more than 28% of your gross monthly income. This will quickly become an in-affordable expense.

Mortgage lenders will most often require a 20 percent down-payment at the time of your purchase. However, there are certain states that offer first-time home buyer programs that can bring this number down to as low as 3%.  Here at United Security Financial, we offer a down payment grant that will allow you to purchase your home without paying a down payment out of your pocket.

  • Interest Assistance: There are organizations that assist borrowers with lower-interest payment loans and help borrowers pay off interest.
  • Grants (as we mentioned above – United Security Financial uses Eagle Connect Fund to offer an excellent Down Payment Grant with no  repayment that will get you into a home without worrying about a down payment). The grant is available to qualified home owners.*

*620 Fico Score
*No First- time Home Buyer qualifications
*Standard FHA/FNMA Requirements

  • Loan Forgiveness: Some institutions provide full mortgage loan debt relief (forgiveness) after a specific number of years – assisting home owner stay in their home for longer periods of time.

If you have served or are serving in any branch of the Military, you can apply for a VA loan which will, typically allow you to receive a lower interest rate and 0% down on your home.

2. Pay your bills regularly and on time.  Lenders will appreciate a responsible borrower.  Additionally, when you pay on time and your entire bill due you will have a better credit score, which, in turn will help you get a better interest rate when refinancing.

  • If your student debt is a foreseeable major obstacle in your future, consider enrolling in an income-based repayment program (specifically for federal loans) or defer your payments for a later date. Keep in mind deferments often cause interest rates to be raised.

3. Get a better savings account. A savings account with a higher interest rate will save you more in the long run.

CitiBank, American Express, and Barclays all offer this higher interest rate option. Be sure to check with your bank to see if they offer this type of account or if they require a minimum deposit amount.

  • Automate your savings plan. (We think this might be the best piece of advice we’ve seen for saving extra money) Don’t put away your own savings. Most people are not fantastic at keeping their savings account full. (You should always keep double what you need for a month of bills in your savings account.) We believe the easiest way to do this is by having your employer automatically take some out of your paycheck and deposit it directly to your savings account.

4.  Create and stick to your budget.

Be aware of how much you spend each month. Eliminate any extra expenses.

  • Cancel any unused subscriptions.  Amazon Prime, Cable subscriptions, Book/Clothing/Food subscriptions, etc.
  • Skip eating out during the week. Give yourself one or two days a week if you feel you need to eat something on the go occasionally.
  • If you live in the city, rely on public transportation instead of your car.
  • Prioritize investments. Are student loan repayments or is purchasing a home more important to you?
    • If it helps, track your spending on a spreadsheet. You can limit spending on Amazon as well by using Amazon Allowance – which puts a limit on your account so you do not overspend.

5.  Put all bonuses, raises, tax returns, birthday gifts etc. into your bank account.

Mortgage companies want to know that you know how to save.  These extras won’t eat into your regular budget and earnings, so be sure to deposit them into the bank or use them to pay off a bill.

6.  Get all your available tax deductions. Some deductions you may know about are found below.

  • Charitable Donations: Deduct up to 60% of your income on charitable donations. Be sure you can prove these transactions to the IRS.
  • Job Search Costs: Searching for new employment in your chosen field can help you become eligible for deductions associated with job hunting.
  • Medical Bills: anything exceeding 7.5% of your AGI are eligible for a deduction. Dental and Medical may both be included.

There are a number of money making apps you can use to up your income. Check out our favorites:

  • Uber or Lyft (Become a driver)
  • TaskRabbit: Help busy people with their chores.
  • Wag! Walk dogs for busy people.
  • Instacart or DoorDash: Deliver Groceries or Restaurant food.

No matter how you choose to do it. Saving early is the way to go. There are so many online resource in which you can make money and save money and there are many resources to help you get the loan you need to proceed with the purchase of the home of your dream. Get started saving now for the future so you can be ready when the time comes.

Don’t forget to contact us to learn about our Down Payment Assistance Grant Program. We work in 48 states – Excluding Massachusetts and Hawaii.

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