One of the most significant milestones in life is to buy your own home. Living on a rental property doesn’t exude the same sense of ownership and belonging that your own home does. No matter how small or intimate, having your own home is one of life’s greatest treasures. Once you have a house to your name, you feel confident enough to make necessary life decisions such as getting married, starting a family or broadening your investment portfolio.
However, given the nature of the real estate industry, buying a home isn’t easy. The cost of buying a house adjusts seasonally and according to changing market trends. It’s possible that you might have enough money to invest in property when it’s a buyer’s market.
But as soon as the market picks up and the value of the property appreciates, you might lack the funds to buy a house. Many individuals have to turn to financial lending institutions to get a loan, which has made the house buying process relatively easier and affordable for buyers of all ages.
This brings us to the crux of the matter: what is the right age for buying a house?
This a poignant question that has prevented many people from buying a house. Many factors come into play when you discuss the appropriate age for buying a house. It’s not just the number of years you’ve lived; age is also measured in terms of the stage. Consult your real estate agent, who will elaborate on each of the following factors and brief you about the process.
Monthly Income and Finances
Let’s start with the foremost thing on your checklist when you buy a home: finances. Financial stability is a major factor that determines your purchasing power. If you’re already earning six-figures, it’ll be much easier to save up for a home. But that’s only 9% of Americans. That’s a relatively small cohort that excludes most people who don’t make as much money. Only 10.3% of people earn $200,000 or more annually, compared to 53.6% that earn $74,999 or less in a year.
If you’ve ruled out the possibility of saving to buy a house, the next stop is a house loan. There are various financial institutions in the area that lend out a house loan at a reasonable interest rate. The rates are based on the loan term. The average rate for a 30-year term is 2.89%, whereas a 10-year term is 2.731%. You might think that a 0.1% difference doesn’t matter much, but when you’re talking in 6- or 7-digit figures, it can amount to a lot!
Getting a loan is the easier bit; it’s harder to meet the monthly loan payments deadline. The 28% rule dictates that the monthly payments shouldn’t exceed 28% of your paycheck. This ensures that the loan payments don’t compromise your standard of living. Putting a chunk of your income away toward loan payment leaves less for you to spend. But there are some needs that you need to meet for sustenance. Stick to this rule and set a budget for a new house that’s affordable for you. That said, if you have a reliable job, you’re old enough to buy a house.
Another factor that determines whether buying a house is an age-appropriate decision is your family structure. If you’re in that stage of your life where you have a spouse and a kid, and you’re still paying a lump sum in rent, it’s time to buy your own house. This also goes for times when you’re expecting a new baby, moving into a new town for your child’s education, or have your parents moving in with you.
All such situations require that you make amendments in your living condition. You might have to add more rooms, a nursery, a backyard, or a garage space in your house. These are big renovation projects that might not even be possible if you have a small space. You need to move into a larger house.
It might sound like a daunting task, but it’s the same as putting the rent money toward monthly loan payments. But that mandates that you have enough in your account to cover the down payment. Once you start planning to buy a house, you might have to make lifestyle changes to save more. This means cutting down on dining out, family vacations, extravagant spending, home renovations, and unbudgeted spending. Once you’ve saved enough, you can hire a real estate agent and start looking for a suitable home.
Studies have been conducted on finding the ideal age for buying a house. The Urban Institute has released a study that reveals the target age for making this move. The study elaborates how making this decision at the target age can help you make the purchase most profitable.
The study looked at a sample of 18,000 people and discovered that buying a house at an age within the 25-34 window is ideal. It elaborated on home equity—the house’s real value according to the present market, which is the difference between the appraised value and the mortgage you still owe.
You want to have more housing wealth as you age. The real estate industry mutates according to the era, and property values go up over time. If you follow the target age and buy a house as young as 25, you’ll have more home equity as you enter your 60s. However, this rule doesn’t apply to ages under 25, in which case, the median housing wealth can be significantly lower.
The reason is that when you’re in the target age bracket, your income is more, and you buy a property with a higher value. High-value homes will proportionally appreciate more in the coming years as you pay off your mortgage. This makes you wealthier when you’ve paid off all your loan and finally own the house!
Only the most seasoned real estate brokers can understand these technicalities and the buyer’s financial profile. If you have someone you can fully trust, you can lay down your financial situation without any inhibitions.
Maintaining transparency with your real estate broker enables them to make the best decisions for you. They’ll also assess your finances and guide you about seizing the right time to invest in real estate.
Phillip Fehler is a real estate broker at Fathom Realty. His experience in the real estate industry has granted him expert knowledge of the property market. He has offered his real estate brokerage services to many residential clients in Fayetteville and Fort Bragg in North Carolina.
His clients have always returned with positive reviews for his work ethic, commitment, knowledge, and service quality.