Buying a home is not the top-most priority of most 20 somethings. But according to real estate experts, the earlier you buy your house the better. Here’s why buying a home in the 20s is crucial.
Ah, your twenties! You are fresh out of college, eager to make a mark in your professional career while trying to fit altogether the jigsaw pieces of the puzzle called life. While only a small percentage of people manage to sort out their lives in their 20s, a majority of 20 somethings take life as it comes.
Hooked to their social media profiles 24×7, the 20 somethings of our country passionately discuss movies, books, TV series, sports, and even politics. But unfortunately, buying a home for themselves is not at the top of their priority list. Having no money for the down payment, the unwillingness to tie down a huge chunk of their salary to pay Home Loan EMIs, procrastination – there are plenty of factors that contribute to lower interest levels to buy a home among young working professionals. But here’s the catch! According to real estate experts, the earlier you buy your house the better.
We, at BankBazaar, are here to explain why the aforementioned claim is true and to tell you what you need to do before you buy a house if you’re in your 20s. So, if you’re trying to figure out what it takes to buy a home, then you have come to the right place.
Additional Reading: 5 Money Mistakes To Avoid In Your 20s
Why buy a house in your 20s?
The most obvious reason to buy a house in your early 20s is that it becomes easier to pay off the Home Loan as you have plenty of earning years ahead. When you opt for a Home Loan in your early 20s, you get to choose the term and EMI according to your needs – a privilege 30 somethings seldom have, thanks to fewer earning years ahead. Buying a home when you’re in your 20s reduces the burden of paying hefty EMIs in the twilight stages of your career. With property rates skyrocketing, buying a home could end up being a super expensive affair in the future. So, the sooner you buy a home, the better.
Things you need to do to buy a house in your 20s
Once you are convinced that buying a house in your 20s is a great investment move, there are a few things that you need to do before you live under your own roof.
Start saving for the down payment
The first and foremost thing you need to do if you want to buy a house is to build your savings for the down payment on your house right from the time you get your first salary. When you apply for a Home Loan in your early 20s, banks might sanction between 80%-90% of loan amount but the remaining 10%-20% has to be paid by you from your pocket as down payment. Since the real estate rates are steep, it is advisable to start saving money for your down payment fund at the earliest. If you’re serious about building up a corpus for to fund the down payment on your house you can consider opening a Recurring Deposit or start an SIP in Mutual Funds. If you get a lump sum of money, you can either invest the entire amount in Mutual Funds or if you prefer, open a Fixed Deposit.
Additional Reading: All About The Down Payment For Your Home
Clear existing debt
Your 20s are when you are in the initial stages of your career and your take-home salary isn’t that high. So, in order to sanction a Home Loan in your name, the bank will scrutinise your bank statement and decide whether you are capable of paying the monthly EMIs on your Home Loan. If you already have an existing loan or are in debt, the bank might only be willing to loan you an amount based on your repayment capability. So, it is advisable to clear off pending loans and debts before you go on a hunt for a Home Loan. Most 20-something peeps carry the burden of an Education Loan for years. So, focus on repaying the Education Loan as soon as possible (ASAP) as it will enhance your chances of getting a better deal on your Home Loan. Even if you are carrying a Credit Card debt, it will be wise to clear it off before you start the Home Loan approval process.
Additional Reading: Tips To Deal With Credit Card Debt
Check your Credit Score
An important factor that might make or break your Home Loan request is your Credit Score. Based on your past history of borrowing mentioned in your credit history, your Credit Score is decided. And higher the Credit Score, the better are your chances of Home Loan approval. If you have borrowed in the past and have paid the dues on time, then there’s a good chance that your Credit Score will be decent. There are quite a few young working professionals out there who have no history of borrowing. In such cases, their Credit Score will show up as NA or NH. In a case like this, the bank will have no means to verify your debt repayment history and capabilities and might, therefore, reject your Home Loan application. You can build your Credit Score by opting for a Credit Card and paying the Credit Card bills on time. So, in order to improve your chances of Home Loan approval, make sure that you build and maintain a good Credit Score.
Have your documents ready
Proper documentation is the key to sanctioning of a Home Loan application. You would be surprised to know that a large number of loan requests are rejected due to incorrect documentation. When you fill the application for a Home Loan, make sure that you use the name, signature, and address as mentioned in your proof documents. Carry enough photographs with you when you go to visit the bank. Keep the following documents in place:
- Identity Proof
- Address Proof
- Last 6 months bank statement
- Pan Card
- Last 3 months salary slip
- Processing fee cheque
- Form 16/ IT Returns
Check your eligibility for a Home Loan
Before you go house hunting, there is one last and most important step that you need to take – find out which Home Loans you’re eligible for. Now, the traditional way to go about getting the Home Loan involves approaching the bank with a loan request only after zeroing in on the house you like. In pre-approved Home Loans, even before you start house hunting, you go to the bank with all your documents and the bank looks into it, and decides if you are eligible for the loan or not.
However, the process is a lot easier these days. You can check your eligibility for a Home Loan online, based on factions such as your age, income, Credit Score, etc. and only then apply.
Click here if you’d like to check your eligibility for a Home Loan right away.
Have a far-sighted approach when you zero in on a property
While zeroing in on a house, make sure that the locality is decent and has lots of scope of infrastructure development in years to come. If you don’t have long-term plans to stay in your current city, then it is advisable not to buy a home in that city. Ensure that the house has acquired all the necessary approvals from various departments of the government. When you buy a house, check if it fulfils your long-term requirements as well. In the future, the house should be appealing to the sensibilities of a 50-year-old you. Got it?
Additional Reading: Tough Financial Situations We Face In Our 20s
Now that you know all about buying a home in your 20s, go ahead and plan to buy a house ASAP. While we said that the earlier you buy it the better, it is never too late to have a house of your own. So even if you are way past your 20s, now is the time to buy a house. So stop procrastinating and make efforts to live under a roof that you can call your own. Go explore our awesome Home Loan offers, already!