Buying a Home in Your 20s

Buying a Home in Your 20s

If you are a millennial trying to get into the housing market then this post is going to be the only one you need to read. In your 20s, buying a home might seem like a fantasy in todays market, but YOU ARE NOT ALONE. A ton of millennials are considering home buying in 2023 but aren’t sure where to start. There are a few things you need to know before becoming a homeowner, and they are packed with important information to avoid you from making a moving mistake. So keep reading!

 Though home buying can seem daunting, millions of millennials have done it. Millennials are now the single biggest group of homebuyers in Canada!

But is this move right for you, too? Let’s break it down.


Are you Eligible?

The first question you will need to ask yourself is are you actually eligible to buy a home? If you have a sufficient credit score, steady income, and enough savings to cover the down payment and closing costs, then the answer may be yes. Also keep in mind most mortgage lenders require a two-year job history to qualify for a home loan. So if you are just starting your career, you might not have enough of an established work history to get financing.

 If you determine that you are eligible, the benefits of home ownership are SIGNIFICANT. Especially when you are younger. A home is a long-term investment, and when you’re younger, you have more time for that investment to grow. If you stay in the new home long enough, you could build serious wealth.

Real estate wealth can be flexible, too because there are so many things you can do with it. Obviously houses appreciate in value so selling it for a profit at a later date is the main reason for success. But you can also turn it into an income -earning rental property when you’re ready to move up or borrow against your home’s value at low interest rates to generate cash

 Homeownership also helps 20-somethings because it means:

  • Consistent, reliable payments — No more annual rent hikes from your landlord
  • More control to customize the property — You can do whatever you want to your home once you own it
  • Tax benefits — Homeownership comes with several potential tax benefits that might lower your tax burden and increase your annual refund
  • You could also save on monthly housing costs. Rents have been skyrocketing in most major cities in recent years, while average mortgage payments are often comparable to or lower than rent in many regions.
  • Finally, you have the option of renting your property on Airbnb or other similar sites to make extra cash as needed.

So how do you go about the home buying process if its your first time? Here is where to start:

 Step 1: Prepare your credit & finances

The best place to start before applying for a mortgage or starting the home search is to start prepping your finances. Preparing these will help you better afford your monthly payment and improve the mortgage rates you’ll be offered.

In order to improve your finances:

Work on your credit score

Start paying down your debts, beginning with your highest-interest ones first. If you have any collections to your name, settle those and make sure your accounts are in good standing.

Cut out unnecessary expenses

You’ll want to have a good cushion in your savings account before purchasing a home, as this helps cover unexpected expenses and gives you the “cash reserves” mortgage lenders look for. Be prepared to reduce your spending wherever possible.

Be prepared for other associated costs

Your mortgage and down payment aren’t the only costs you’ll have when you buy a home. Make sure you’re prepared to pay for closing costs, moving expenses, new furniture, property taxes and more. You will definitely want to have some wiggle room in your budget to account for these.


Step 2: Minimize your down payment and closing costs

The old 20% down “rule” isn’t necessarily true, but you’ll still face some serious up-front costs when buying a home. On top of your down payment, you’ll also have to cover closing costs — and those can range anywhere from 2% to 5% of the total purchase price of your home, depending on the lender.

Fortunately, there are ways you lower these up-front costs or at least make them easier to afford. Speak to a mortgage broker to find the best solution for you.

3. Find the right home

The first step in home shopping is to determine what sort of payment you can afford by getting a pre-approval letter. Use a mortgage calculator to find the price range you are comfortable with, and make sure it still leaves enough cash flow to cover your other monthly expenses (unexpected ones, too). Once you have a solid price range in mind, start the search. You should consider working with a real estate agent who is familiar with the area you want to buy in. Once you find the one, you can submit an offer.

Pro tip: have a list of “must-haves” and “nice-to-haves” when touring homes. Bring this list with you on every showing, so you can compare apples to apples


4. Get your mortgage lined up

To start the mortgage process, you’ll first need to find the right lender. There are hundreds of potential options — from big banks and financial institutions to fintech firms, credit unions, and more. I highly recommend using a mortgage broker, since a broker can compare different rates for you at no cost to you.

Once all is said and done, you’ll get your keys and the home will be yours.

Also, don’t forget to check your eligibility as a first-time home buyer. The First-Time Home Buyer Incentive is a shared-equity mortgage with the Government of Canada, which offers:

  • 5% or 10% for a first-time buyer’s purchase of a newly constructed home
  • 5% for a first-time buyer’s purchase of a resale (existing) home or
  • 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home

There you have it, maybe buying a home in your 20s is not so far away. I hope you found this information useful! As a realtor specializing in the Liberty Village and Toronto real estate market, I am here to help guide you through the entire buying or selling process. Grab a copy of my FREE Toronto guide by reaching out to me on the Contact page or on my social media. Look forward to speaking with you!