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Certain pillars of adulthood feel more achievable than others: finally learning how to hang a gallery wall, say, or flossing. Homeownership, on the other hand, remains a pipe dream so bewildering that the mere idea is as unrealistic as joining the ranks of people who know where to find the “portico.” (In the bathroom, right? It sounds like a bathroom word.) But that first home might not be as far off as you think. While general wisdom has shifted slightly in the wake of the mortgage crisis, ending the lifestyle in which you play victim to the whims of landlords and the shrinking rental market can still make good financial sense. And getting started is easier than it appears. We all know an 18-year-old jerk who’s all, I saved my lemonade-stand money and, oops, guess I bought a detached 3-bedroom with prewar details! You, too, could be one of those jerks.
While the sheer size of down payments can seem terrifying, your first home is still a purchase like any other: With time and a strong savings strategy, it can be realized. “Consider setting up an automatic savings plan where some money goes directly from your paycheck to a down payment savings plan,” says Zach Teutsch, founder of Values Added Financial. “Alternatively,” says Teutsch, “you can set up a recurring transaction to transfer money from your checking account to a special savings account for this purpose.” Apps like Acorns or Digit make this simple, automatically deducting small amounts of money from your bank account to either save or invest. Proactive yet lazy: the perfect combination.
Mysterious dead uncles, that scratch-off ticket a former tenant left under a floorboard, a hoard of pirate gold, your tax return. We tend to view these windfalls as magical money birds and therefore not subject to the same rules as the rest of our finances. But rather than going wild, put unexpected jackpots into your savings account. Similarly, a raise doesn’t have to lead to a lifestyle upgrade if you already have what is necessary to cover basic needs. Set up automatic transfers to move the additional income into that savings account, and let it work for you.
Getting married? Teutsch suggests including the option to help with a down payment on your registry. “In some cultures, giving money as a gift is encouraged,” he says, “but for many Americans, it feels awkward.” Using a registry website like Honeyfund, which offers specific options for down payments, makes it more likely that your guests will give freely. After all, Teutsch notes, “How many vases do you really need?”
Feeling snowed under by student or credit card debt creates a psychic block that makes it nearly impossible to plan for the future. So before you start thinking about mortgages, put your energy toward clearing out your debt. Programs like Mint and LearnVest can consolidate loans, help you create a realistic payment plan, and create a clear roadmap toward that first converted loft with the obligatory exposed-brick accent wall.
So much of what makes a first home seem unattainable is that much of the conversation takes place in a foreign language. What exactly is a mortgage, anyway? Does anyone really know? Even if you don’t believe you’re ready to join the ranks of homeowners yet, taking the time now to understand what it takes to buy a home will allow you to consider the possibility more realistically. If you’re feeling especially productive, go one step further and investigate the First Time Homebuyers loans, which you might be eligible for, such as a Federal Housing Administration loan or the Good Neighbor Next Door program. “Some of these will have higher monthly costs as a result of insurance, but less of a down payment,” Teutsch says. “There are also programs such as the FHA’s Section 203(k) loan that may be of special interest to architects, contractors, and others who may want fixer-uppers.” A little research can go a long way toward building the self-esteem necessary to bring your dreams down to earth.
