In this article:
In 2020 the U.S. Census Bureau reported that 23.8% of people ages 25 or younger owned a home. That’s a fairly impressive number when you consider how difficult it is to achieve homeownership at a young age. If you’re young and want to buy your first home, let's look at what age you need to be — and how age can impact the process, even if it isn’t legally standing in your way.
Can you buy a house at 18?
In most states once you turn 18 you are old enough to reach the age of majority, which enables you to complete the legal documents required to buy a home. This means that in most states you can legally buy a home on your own starting at the age of 18 — the exception being that in both Alabama and Nebraska you reach the age of majority at 19.
For most people, that age minimum is reasonable, since few teenagers have the resources to buy a home anyway.
But nowadays, kids are making their own money by rising to viral fame online. So if you have the capital, can you buy a house at 16, or even younger? The answer is technically yes, but if you are still a minor you’ll need someone (like a parent) of legal age to cosign all of the legal documents.
Let’s refocus on potential homebuyers who are over 18 as they’re more likely to be ready to buy a home than the average teenager. Where young folks may run into barriers is when it comes time to obtain a mortgage loan (unless you can make an all-cash offer). At any age you will need to meet lender requirements to be approved for a home loan, and being younger can make that harder to do. How so?
To start: Proving to the lender that you can afford to make your mortgage payments is hard when you’re young, as you need to show a history of consistent employment. In addition, if you’re young you likely won’t have a strong credit score yet. It takes many years to build a good credit score, making it easier to qualify for a mortgage.
If you have enough cash on hand to afford a large down payment and closing costs, you can qualify for a mortgage without a strong credit score. That said, when you have a low credit score you’re more likely to pay higher interest rates which can increase the cost of homeownership greatly over the life of your loan.
How to buy a home when you’re young
Again, age isn’t an outright barrier when it comes time to buy a home, but being young can make your journey to homeownership more complicated. Here are a few factors that will help you be more eligible for a home loan.
- Solid debt-to-income ratio (DTI). This ratio compares how much debt you have in comparison to your income once you take on a home loan, which helps signal to lenders how manageable your mortgage loan will be. If you have student loan or credit card debt, try to pay it down before you apply for a mortgage to lower this ratio. The lender will take what your DTI will be if they grant you a mortgage loan into account to make sure your budget won’t be too tight.
- Proof of income stability. Lenders like to see proof of a stable income that indicates you will be able to make your mortgage payments, as well as other costs associated with homeownership like property taxes, maintenance, and insurance.
- Large down payment. While conventional loans only require a minimum of a 3% down payment and FHA loans only require 3.5%, it’s ideal to save much more than that to make it easier to obtain an affordable mortgage with a lower interest rate. You need to make a down payment of 20% if you want to avoid paying for private mortgage insurance (PMI).
- Additional savings. On top of a down payment, you need to have enough savings to cover other expenses like the appraisal and inspection, mortgage loan fees, and closing costs.
- High credit score. The higher your credit score is, the easier it will be to obtain a mortgage with favorable rates and terms. If you aren’t in a rush, spend some time building up your credit score before you apply for a home loan.
What to do if you can’t buy a home yet
If you find that you aren’t ready for homeownership just yet, you have a few options for how to work towards that goal while you wait until the time is right. Here’s how to make the most of those options.
Live with family and save aggressively
If your parents or another family member like a grandparent will let you stay with them for free or at a discounted rate, you can save a lot of money to put towards a bigger down payment. It’s easier to qualify for a home loan when you don’t need to borrow a lot of money and a big down payment can help reduce the amount you borrow.
Rent, or rent-to-own
Every time you pay rent, it can feel like you’re making less progress towards your financial goals — but that doesn’t need to be the case. Confirm that your landlord is reporting your rent payments to one or more of the three main credit bureaus (Experian, TransUnion, and Equifax) as those payments can help improve your credit score. If your landlord doesn’t report your payments, you can pay to use a third-party service that will report your rent payments to the credit bureaus.
You also have the option to enter a rent-to-own agreement which lays a more clear cut path to homeownership by allowing you to rent a specific home until you are ready to purchase it (with your rent payments making up the down payment).
Apply for a first-time homebuyer program or loan
If you really don’t want to wait to buy a home, you can look for assistance. First-time homebuyers will likely find it’s easier to qualify for a first-time home buyer mortgage loan or an assistance program that provides financial support for those looking to buy a home for the first time. Usually these programs require smaller down payment amounts, provide forgivable loans, or allow you to skip paying PMI even with a low down payment.
When it comes to homeownership, age is just a number and not the most important one. Having a solid down payment, a high credit score, and proof of a consistent income will play a much bigger role in the mortgage approval process than your age will. While it’s true that it’s easier to obtain these qualifications when you’re older, being young doesn’t necessarily halt your dreams of ownership.