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Potential First-time home buyer?
I am 20 years old and am trying to prioritize my life and plan for my future. Step 1, I've established a savings account that I contribute to out of every paycheck. I have bad credit, am a little bit in the hole, but I'm working on that. I have not yet owned my own home, but I want to. I am currently considering my options for making the smartest decision on what the first move I make should be. Should I rent-to-own, or try to get pre-approved from a bank, despite my credit? What else would be a good option?
- spalmerLv 71 decade agoFavorite Answer
Rent to own is very risky and I wouldn't recommend it unless you're prepared to lose the property and have the money you paid simply be rent. The owner could go through foreclosure, or you could find yourself unable to get financing when the time comes to purchase.
At 20 years old, are you really prepared to purchase a home? There are some 20 year olds who are ready... but not the majority. You need to have good credit, money saved for the down payment and closing costs + an emergency fund that will stay intact, you need to have a steady employment history, and you need to be prepared to live in the same place for 5-7 years.
I would honestly suggest renting an affordable place for the time being, while you continue improving your credit, get all your debt paid off, and continue saving. Renting is beneficial because it can give you an idea of what you really "need" and "want" in a home. Renting allows you to move around if needed. Many people think that owning is cheaper than renting, but this usually isn't the case unless you find a really cheap property in good condition. When you own, you'll pay your monthly payment which includes: principle, interest, taxes, insurance, and pmi (if you put down less than 20%). You're also responsible for all of the maintenance and repair costs... which could be minimal the first few years ( a few hundred a year) or you could be hit with a major problem and end up replacing the plumbing, roof, electrical, etc. Would you have a few thousand dollars for these fixes? You also typically have higher utility bills with a home (although this depends on the size, insulation, energy efficiency, etc.) I am a big fan of home ownership... for those that are ready and who want to own. However, you shouldn't rush into the process. Start reading books on first-time home buying to educate yourself on the process and start looking into neighborhoods and school districts. Even though you likely don't have children right now... if it's a possibility for the future, the school district is a big deal (this is also really beneficial for resale). Good luck to you.
- ?Lv 71 decade ago
Your best option is to continue to rent, clean up your credit, continue to put money away in the savings account and in 2-3 years when you have an established work record,increased salary and at least 20% for a down payment then you can start looking for a small house(not a condo) to buy. Do not try to rush into a major purchase like a home until you are properly prepared or you will end up like many that have lost their homes and savings to foreclosure. Also NEVER consider a rent to own situation! Good Luck
- Anonymous1 decade ago
My advice would be to continue to rent and save as much money as possible, without too much disruption to your social life. It is important to still enjoy yourself.
Are you able to move back home for a short period of time? This would allow you to save on rent and sort out your credit situation.
I would avoid doing the 'rent to own'. From my readings you would be paying a lot more for a property with this method.
I would aim for a 15 to 20 per cent deposit. It may take you a few more years, but it will be worth it.
Best of luck!Source(s): http://www.ljhooker.com.au/ask-lj-hooker/about-buy... http://www.ljhooker.com.au/ask-lj-hooker/about-buy...
- Anonymous1 decade ago
To recieve the first time home buyer credit, it must be your primary residence, however, I know there are some exceptions for miliary personnel. I would consult a tax accountant or check the IRS website at IRS.GOV. as many questions are answered on that web site. Also to qualify you must not have owned a home in the last 3 years.
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- A HunchLv 71 decade ago
It's completely ok to rent.
In your 20s a lot of things change - career choices, relationship choices, locations, etc.
In 8-10 years when you know where your life is going, you can consider purchasing a home. If that is something you still want to do.
- 1 decade ago
just wait - u r too young