If you haven’t owned a home before, there are many reasons to look forward to this major step in your life. Leaving the ranks of the renters can be an investment in your future, and you also get a little more privacy and freedom to make changes to your home than if you rent. The money spent on your mortgage also accrues wealth, unlike money used to pay rent.
The National Association of Realtors notes that the typical age of a first-time buyer is 35, which is down from 36 in 2022. Homeownership rates have also risen significantly for certain marginalized communities in previous years; for example, 44.1% of Black individuals now own their own home, though they still trail behind their peers. Approximately 46% of LGBTQ+ individuals are homeowners, though it’s not clear whether this is an upward trend because this data is just now being collected for the first time.
Many prospective buyers wonder what the right age is to buy a house; you may be curious about the right age to buy a home. The general trend right now is for young adults to wait longer to buy homes because of the long-term commitment and fluctuating mortgage rates.
However, there is some validity to figuring out what age you should be when you buy your first home.
The Myth of the "Perfect" Age for Homeownership
First of all, let’s address the answer to the question directly: there is no perfect age for first-time homebuyers. Some buyers take the leap at a very young age while others wait a long time to shift away from renting. It is important to have some of these mortgage myths debunked so that homebuyers know what they are getting into and have all the information required to make the right decision.
There is no perfect age to buy a house because it is entirely dependent on your financial situation and personal preferences. If you are 21 years old and already have a stable income and enough money for a down payment, then there may be no reason to delay. On the other hand, some people simply prefer the short-term commitment of a lease agreement. It all depends on if you are ready to take on that responsibility.
Factors That Influence the Best Age to Buy a House
While age itself is not the best indicator of readiness for homeownership, it does play a role in where you stand in the following factors. Here are some things to consider when determining the best time to buy a home for yourself or your family.
Financial Readiness
Perhaps the most important factor in your home-buying timeline is financial readiness. If you are not fiscally prepared to buy and own a home, then you should wait to do so until you are older and have had time to stabilize your finances.
There are many elements of your personal finances that need to be addressed before buying a house. You will need to improve your credit score to qualify for financing and access better interest rates. Your debt-to-income ratio may need to be be 43% or lower. However, the number can also be higher depending on your circumstances. It’s important to work with a professional company like Pride Lending to determine if you qualify for financing. You’ll want to apply for mortgage pre-approval to get an idea of your spending limit. When you accomplish these goals, you might have the best time to buy property.
Career and Lifestyle Goals
Buying a house should also depend on your professional and lifestyle goals. Are you uncertain about your career or have yet to find a stable job? You should probably wait until you have consistent income before buying a house. Similarly, what are your future plans for your life? Do you want a family and children? Do you intend to live life on the go, rarely staying in one place for long? Career and lifestyle should be major factors in your decision whether you are younger or advanced in years.
This maxim plays out in the statistics surrounding marginalized buyers. For example, having a child increases the likelihood that LGBTQ+ borrowers will purchase a home; this is partly because many same-sex couples adopt, and they must be able to prove financial stability in order to be approved.
However, there’s a significant gap in homeownership rates between married heterosexual and same-sex couples, but this may be explained by the lower marriage rates between same-sex couples overall.
The statistics look a bit different when considering race. For example, married Asian couples are more likely to own homes than their unmarried counterparts. On the flip side, the highest share of homeownership in the Black community is among single, unmarried women.
While these statistics demonstrate that there are different trends among certain demographics, they shouldn’t discourage you from purchasing property if that is your ultimate goal. No matter your race, gender identity, or sexuality, Pride Lending can help you find financing for a primary residence or investment property.
Personal Preferences and Priorities
Buying the right home is just as important as deciding when to buy a home. You shouldn’t rush into choosing a property just because you want a house and can afford it. What are your priorities for the type of home you are looking for? Consider things like the style of the house, the square footage, the type of neighborhood it is in, and even your renovation plans. Waiting to find the right conditions might mean you’re a little older when you buy your first house.
Mortgage Variables
Most buyers, especially those who are buying their first home, have to take out a conventional loan to afford the purchase price. A mortgage is an important responsibility, so you have to be old enough to understand how it works before you make this type of commitment as a first-time homebuyer.
Down Payment
The down payment is the amount of money you pay upfront to reduce the cost of the loan. If you make a big down payment, your total loan amount and mortgage payments will be smaller. Often, the best age to purchase a home is when you have saved up a large down payment. Most buyers try to achieve down payments of 20% since they can avoid paying private mortgage insurance (PMI) if they reach that amount. In the past few years, the average down payment on a house was roughly 14.4% across the country, with the median down payment being just over $34,000.
It’s possible to find mortgage options that only require 3% down for first-time buyers, as well as options with only 5% down for repeat buyers. However, you may have to pay more in interest due to this in addition to PMI.
Thankfully, Pride Lending can help you find assistance programs that reduce your investment while allowing you to put more down. This includes local, state, and national programs meant to help borrowers, especially individuals from marginalized communities.
Closing Costs
Closing costs are another upfront expense to consider. They are necessary fees that must be paid when you close on the house. They include expenses like realtor fees, attorney fees, loan origination fees, and title transfer taxes. Many first-time homebuyers choose to roll their closing costs into the loan amount, which increases their monthly payments but reduces the upfront cost of buying a house. However, this is only possible in certain circumstances. There must be a seller or lender credit, and it’s only possible for a USDA if the house is appraised higher than the purchase price. You can roll the closing costs in when you refinance.
Monthly Payments
Your monthly payment is where the bulk of your money is going to go as a new homeowner. This is the amount you pay each month for the duration of the loan. The larger your upfront payment, the lower your monthly costs will be. A monthly payment includes both principal and mortgage interest. For most loans, you will pay a larger portion of the interest early on with smaller principal payments, but that will shift the other way the later you get into the loan term. Other costs that might be part of your monthly payment include mortgage insurance and taxes.
Early Adulthood (20s - Early 30s): Pros and Cons
Although there is no perfect age for buying a house, there are some differences that naturally occur when you buy your first home at varying stages of life. Purchasing a house as a young adult in your 20s or early 30s has several benefits and challenges to consider.
Advantages of Buying Young
Buying a house earlier means you start building equity in the property. Equity represents the percentage of the home that you own versus the lender, and you can use that equity to refinance, borrow cash, or make a profit when you sell the home. The younger you are when you buy the home, the earlier you will build substantial equity that can be used. This increases your potential for long-term financial growth.
Another advantage is that you have greater control over the living space. With that control comes the freedom to make whatever changes you want and create a long-lasting positive experience as the homeowner. Buying a home at a younger age can be a great idea for long-term planning and to start early on building equity.
Challenges for Younger Buyers
There are also some disadvantages for younger homeowners. First, it is harder to obtain financial stability that quickly, and a mortgage will quickly become a burden if your income is not stable, leading to you becoming “house poor:” most of your wealth is tied up in your home, and you don’t have much disposable income.
It is also difficult to save up for a sizable down payment at this age, so you may only be able to afford lower home values.
This is especially true for LGBTQ+ and BIPOC borrowers. LGBTQ+ individuals are 37% more likely to have educational debt, while transgender individuals are 61% more likely than cisgender people to have educational debt. When so much of your money is going to debt service, you’ll find it harder to buy a home earlier.
BIPOC individuals also have significant issues with making enough to purchase a home. For example, Black women make 70% of what a white man does, and Hispanic women only make 65% of the typical salary of a white man. Native American people of both genders make just $0.77 on the dollar of what a white person would make for the same work. As such, marginalized individuals could face even greater challenges when trying to save up during their 20s and early 30s.
Young people tend to have more uncertain career paths and could end up having to relocate for a new job, which makes it difficult to buy a home.
Another obstacle for younger buyers is their lack of a credit history. It takes time to improve credit scores to the point where lenders trust borrowers and will offer good interest rates. Black and Hispanic individuals are 1.8 times more likely than white people to have no credit score whatsoever, which can cause significant challenges when trying to become a homeowner.
Similarly, LGBTQ+ borrowers are nearly twice as likely as the general population to report poor credit. This is especially because they did not have explicit protection against credit discrimination until 2021, when the Consumer Financial Protection Bureau ruled that gender identity and sexual orientation should be considered a protected class included in the Equal Credit Opportunity Act.
For these reasons and more, you might be forced to wait as you slowly improve your credit report to access the home you want.
Mid-Career (Mid-30s - 40s): The Prime Time?
Many homeowners and potential buyers may think of this age as the prime time to buy a house, which is borne out by statistics on when most people purchase their first property. In fact, the gap in LGBTQ+ homeownership when compared to their cisgender, heterosexual peers may be explained by the fact that younger people are more likely to identify as LGBTQ.
This can be considered a great time to buy property because you are old enough to have more financial stability but still young enough to enjoy the home for a long time. Here are the pros and cons of first-time homebuyers being in their mid-30s or 40s.
Benefits of Buying in Your Prime Earning Years
The older you are, the more likely you are to have more savings and stable income. Work experience matters in terms of income, so most people in their mid-30s to 40s probably have stronger incomes. This means greater financial stability, so affording all the home expenses will be more manageable, and you could get a bigger house. Additionally, you have had more time to build up your credit history and access favorable terms.
Another positive factor is that family planning is easier when you are currently or are done having kids. You know what your family situation will be for the next few years, so it is easier to buy a home that suits that lifestyle. Many buyers in this demographic are ready to settle down, and a permanent home allows that.
Potential Drawbacks for Mid-Career Buyers
In the prime of your career, affording a home may be no problem. However, there are limitations that could make buying a house at this time challenging. If you are seeking a home in a more desirable and family-friendly neighborhood, you are going to face higher home prices.
For some borrowers, having children itself is a huge expense that could make it difficult to afford the expenses of homeownership. For example, IVF for a same-sex couple can cost up to $20,000, and this is assuming that you only need one round. Gestational surrogacy can cost well over $60,000 for gay couples. Those who have purchased a home before they decided to start their family may have an easier time affording these costs, but this may not be feasible for everyone.
Additionally, you have to consider future financial goals such as retirement and education for your children while balancing those objectives with making mortgage payments.
Additionally, this is likely your busiest time of life as a worker and potentially a parent. There may be very limited time in your schedule to plan renovations or tackle DIY projects to improve the property.
Later in Life (50s and Beyond): A Different Perspective
Now let’s move on to the final stage of life when someone could buy a house. At this point, there are very few first-time buyers, but it is still a stage when many people buy homes for different reasons. Here are some of the advantages and disadvantages.
Advantages of Buying Later in Life
If you have been working for a long time, then you likely have significant retirement savings and funds to use. That means you can likely get the home you want. Additionally, at this age, you have probably had a steady income for a long time, so you may be debt-free after paying off all your credit card debt and other loans. Older buyers tend to downsize and relocate based on their changing lifestyles as well.
Considerations for Older Homebuyers
There are negatives to buying a house in your 50s and beyond. First, you will likely have to agree to a shorter loan term, which means higher payments. Second, you will need to focus on accessibility. Maintenance issues may be harder to deal with as you get older, so you could end up spending more money on contractors and repair services.
Things get especially complex when you start thinking about estate planning and inheritance. Many baby boomers are facing these questions right now. What will happen to the house if you die? How will your children get the money from the sale? These are extra steps that must happen when you buy a home in your old age.
There are additional concerns for BIPOC borrowers, including that the wealth gap between races widens with age; in fact, the median white person had $251,000 more wealth than a Black person in their mid-fifties. As such, it may be even more challenging for borrowers of color to afford property as they grow older.
When Should You Buy a House?
Deciding when to enter the housing market can be challenging. Is it best to take out a mortgage when you are young so you can build equity right away, even if it means being locked down to a long-term commitment? Does it make more sense to wait until you have greater financial stability so you can afford the payments or even pay cash for the house when you are older?
The key takeaways here are that the average age of a first-time buyer is irrelevant; it really depends on your own situation. If you can afford the principal and mortgage interest payments and are ready for the homeowner’s lifestyle, then any time is the right time to buy a home.
Pride Lending can help you navigate these concerns, no matter how old you are. Our team is composed of allies and members of marginalized communities, including BIPOC and LGBTQ+ people, who are committed to helping everyone achieve home ownership no matter their identity. We’ll help you get a clearer picture of what you can afford and match you to the right mortgage lenders for your specific needs, as well as connect you to helpful resources meant to reduce your upfront costs.
Contact us today to learn more about how we help the LGBTQ+ community build wealth through investments. You can easily reach us at Andrew@pridelending.com or 727-591-7909.
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