Believe it or not, even in these rough economic times, the average age of the first time home buyer has been gradually decreasing. In 2008 the average age was 35 years old, and in 2011 the average age dropped to age 30.
I think of all the people I know that bought a home in the last few years and most of them are 30 years old or younger, which has raised the question: are they different challenges to first-time home buyers because of their age?
It turns out, yes, different circumstances call for different situations, and if you’re a 30 something or younger individual thinking of buying a home, here are some things you need to consider.
1.) Do I have a substantial down payment? An obvious challenge of buying a home at a younger age is clearly not having as much time to save money for a down payment as your older counterparts. A smaller down payment means a higher monthly mortgage payment, which is often why so many people choose to wait a few years more to save up enough money in order to have a monthly payment they can afford.
2.) What will my mortgage rate be? Part of the criteria in applying for a loan is job stability, meaning you need to show that you have been working at a particular job for a long amount of time. For many 20-30 year olds, the length of time they have been at a job is particularly small simply because they haven’t been a part of the workforce very long. It’s perfectly natural to skip from job to job to job during your college years, as you often have different requirements that need to be met (class schedule, moving, wage changes, seasonal work, etc.). However, this doesn’t particularly reflect well when applying for a home loan.
3.) Are my expectations realistic? Many young home buyers simply have no idea just how much certain features cost. A “decent amount of space” might be a completely unreasonable requirement for a 25 year old looking for an affordable place to live in Toronto. Let’s be honest, the words ‘Toronto’ and ‘affordable’ don’t often appear in the same sentence.
4.) Am I ready? Every first time home buyer will need to ask themselves this question, but a young home buyer especially. A younger individual usually has more variables in their life. Are you in a stable job that you will most likely stay in (or even want to stay in) for the next 10 years? Are you sure you won’t have to move (career, relationships, family issues) in the next 10 years? In addition, research has shown that the brain isn’t even fully mature until around age 25, so are you sure you will even want to still own a home in a few years?
5.) Am I able to put in the work? For any first time home buyer, you have to be ready to put in a little bit of elbow grease, but for a younger home buyer, you really need to be ready to do some home renovation projects. A smaller down payment and a likely higher mortgage rate means you will probably have to limit your search to homes that need a little bit of work, and you’d better be ready (read: have the energy and skills) to fix it up a bit.
If you are considering buying a home, why not contact me and we can chat about your options.
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