Ask HN: How to buy a house as a 20 year old in the USA?
I'm especially asking older people. If you were 20 and wanted to buy a house how would you do it in 2022 ?
Then decide what you want and don't want, and go looking for that.
It's really easy to decide, after you've seen two or three houses, that you know what you want, and you don't want to spend another afternoon or five looking at houses. But those five afternoons are going to save you from several years with a house that you quickly figure out that you don't like.
I don't mean just that you don't like the look. I mean, for instance, the way the kitchen is laid out means that it's going to be awkward putting away the dishes when you unload the dishwasher. That's going to annoy you every day or two for as long as you own the house. (Think in terms of Shannon information theory. They stuff you do all the time should be easy, even if it makes harder the stuff you do rarely.)
If you have a spouse or SO who is going to be living there with you, they need to be equally involved in the input. If they spend more time in the kitchen than you do, they need to have greater input into what the kitchen should be like.
Then, once you're really looking, while you're visiting a house, step outside and listen. How noisy is the neighborhood? Do planes fly over it regularly? Trains? Are you willing to live (for years) with the noise level?
How does the neighborhood look? Run-down, or well kept? If it's run-down, it may be more run-down in five years. Is there an HOA? What are their covenants? Are you willing to live with them?
Get a home inspection, and take the results seriously. You're going to have to either fix or live with everything that they find.
After all of that, there is no perfect house. You're going to be making trade-offs. You won't get exactly what you want. Get close enough that you can be happy with it for a few years.
Once you get the home inspection back, don't be afraid to ask for the seller to fix questionable things before closing. Example: We have a heated driveway that was controlled directly by a breaker - we asked the seller to have a regular switch put in, which they did.
If the house doesn't come with appliances you're going to have to open your wallet for them. Do it after you're on contract but before closing. We had to live with a minifridge for over a month because we went to lowes on the day of the closing and the fridge we picked out took that long to get delivered.
Put down a deposit and get a mortgage.
Life is not always that straightforward though. Jobs, loves and your very own ideas (will you be tired of paying all those taxes in the USA one day?) can drive you around the world.
Having to sell your house because you need / want to move to another country can be a painful process. Selling your house and moving is not fun in general - if it's to another country it's even worse. Depending on how many years you'll be in the house, the extra equity you're building up can be worth the hassle or not.
You always have the option to burn some money renting and to invest your money in the market. Or at least that's the general idea in normal times. Now that the market is crazy high after 2 years of locked down economies and 80% of dollars have been printed in the last 22 months, I'm not sure what to expect from the market. Surely the Keynesian bastards working for the government propped things out nicely, but it's hard to forecast what's going to happen now. I'm investing in real estate as well (in cheaper markets though).
That said, I did the very opposite of what I'm recommending. I saved until I was 30 and I had cycled a few countries and then just bought it with cash and no mortgage. I didn't make any lucky windfall either, just working and selling my skillset.
If, at 20, you don’t have that money you have fewer options but you can still buy a house if you do some other things first. Perhaps the most direct route is to join the military and wait 3 years. Then you can build sufficient savings considering your living expenses can be near 0, but you will also qualify for a VA home loan that requires 0 down and no PMI. With the combination of down payment money and VA home loan qualification you have maximum options for financing and many product options in your income range after consideration of property taxes, HOA, debt to income ratio, and so forth.
If I could do it all over again I would maximize for short term equity. As a 20 year old you have almost no needs and can probably survive on a bunk bed sublet. This changes when you get married and have kids. Your needs for space explode. You will want to sell and upgrade.
For a 20 year old loaded with cash I would recommend buying garbage in a hot neighborhood and flip it. When you get older and need more space go far away from the trends. Get cheap land and just sit on it.
Your goal is to use as much leverage as possible to buy assets that will appreciate faster than inflation with low downside risk (unlikely rapid reduction in value).
https://www.hud.gov/program_offices/housing/sfh/203k/203k--d...
(Late 30s, have significant exposure to real estate assets)
It starts by find a property that you like. You can do this in a variety of ways including using a realtor, looking through MLS listings on your own and working with the seller's realtor, looking through "For sale by owner" listings, etc."
As part of this, you can also work with mortgage lenders to do a pre-qualification. This process is basically where they, sometimes, will pull a credit report, get some info from you on your income and your estimated down payment, and tell you what they believe the price range of home you can qualify for will be. This can vary based on the mortgage program that you will end up using, as programs like FHA loans or first-time home-buyer loans might allow you to provide a smaller down payment. Keep in mind, though, that you will need to put some money down. I believe the lowest is 3 or 3.5% on an FHA loan. Typically anything under 20% will require some sort of mortgage insurance, whether it be FHA or private just depends on the loan program.
Once you have found a home you like you will submit an offer. There are many ways to go about this and the negotiations you and the seller get into are going to depend on you both and your associated willingness to negotiate. The market right now is relatively tight, so you cannot always count on the ability to submit or receive a counter offer or two.
Once you have an accepted offer you will work with the mortgage company to submit the necessary documents for mortgage approval, an appraisal will most likely be done, title work gets ordered, you will need to establish homeowners (also called Hazard) insurance, flood insurance if you are in a flood zone, etc. You may also need to work with a realtor and/or attorney to do things like get a survey or deal with some state-specific items like smoke certs, certification of occupancy, etc.
After you have a mortgage approval, you will typically do a final walkthrough of the property on or near the day of your closing and then you sign the documents and hand over the check or wired funds to cover the remaining closing costs/down payment.
Then it's time to move in.
That can sound complicated, but finding a good realtor, mortgage company, and/or attorney can help you walk through it pretty easily. There are things that will vary, but that's the general process for buying a house with a mortgage and down payment.
Well if I was starting at age 20, then it would not happen in 2022 because I'd have little money.
First I would live with my parents. Then I could maximize savings. Not an option for everyone. And not cool. But housing is very expensive relative to income in 2022. A 20 year old me wouldn't have any other realistic way of saving up the money to buy a house while I'm still in my early 20's.
Second, I'd work as a software dev because those are my skills. And it tends to pay pretty decent.
I'd wait till I had at least 20% down, plus a healthy safety buffer of money. I would estimate my monthly living costs to be sure it was sustainable with my current income. Then buy.
Or if I was earning money at an incredible rate, I might wait and buy outright. Sure the money will be tied up in the house instead of an index fund. But I'd gain stability, a wide base where I cannot be knocked down. That is very appealing to me over maximizing gains.
Hope that cleared it up a bit.
I don't think this is an area where creativity expands the existing options. If you have a stable job you will likely be approved for a mortgage. It might not be enough of a mortgage to afford a home in the city or even state that you want to buy. People who buy houses very young usually have generational wealth, even if it's just a parent who co-signs the loan.
Down payment is useful but not necessary. I've bought several houses (just one at a time) with $0 down payment.
FHA loans exist to help lower income people become home owners.
If you move out, you can sell or lease your portion. If you take up more than your 25% of the space, you pay more. (For instance, 4 guys, one gets married, they're using more of the space so they now pay 40% instead of 25%, same for bringing SO's into the mix.
1 person = 1 share of the costs, but only the original signer has rights.
Original signers also have right of primacy to purchase should someone want out, they have to offer it to the other original people before trying to find a new person.
Yes, it is complicated. Yes, it is difficult. But I don't see most people earning early just out of college or just getting into their journeyman levels in the trades being able to cop out $450k plus for their starter home.
Don't buy near vacant land: your house won't appreciate in value ("You should buy land, they're not making anymore"). Don't buy a townhouse/condo either.
Check local demographics of nearby elementary schools.
Assume your real estate agent wants to screw you over and don't trust the buyer nor seller agent.
And I'd buy a house the same way today I would have 20 years ago - have enough of a downpayment (or be willing to accept PMI) to get the intetrest rate I want on a payment I can afford in a place I want to be
It's not rocket surgery
Also at 20 you can have 4-5 room mates in a shit house and that should pay for your rent