How I Bought My First Property at 22 Years Old

Hello everyone! So today I wanna talk about how I able to purchase my first house at 22, I did this while I was in college living at my parents house. I thought it’d be a good to talk about how to actually save up for your first downpayment and what lenders look for when you actually buy a property. So before I get into the aspects of saving of money for your first house, there’s a couple of steps that you gotta follow first. 

• Good credit score. Ideally you’d want to have a score of 740 or higher to get the best rate possible. If you go 720 or less, you end getting charged more interests which is a no no! If you get more interest, the deal becomes more expensive and that eats into your profit margins. 

• Two years of tax returns. Now some lenders don’t always need two years of tax return but this mainly depends on your job and if you’re a W2 or 1099 or self-employed in my case. The whole point of this is they want to make sure that your income in consistent. They want to make sure that you didn’t have an amazing year two years ago and then last year you made no money. Had zero jobs. Zero work. No friends. And this should be super helpful to you because if you’re planning on buying real estate in the next two years, then you can start planning for that. What lenders look at is your net income after all. They don’t add all your deductibles to your net, so if you do wanna buy in the next two years it may be a good idea to show as much income as possible. 

• Bank statements. They’re gonna wanna see the last 2-6 months of your bank statements. Only to check where money is coming in and going out. Or if they see a lot of money coming out of your account every day and notice that you’ve been buying too many Shrek stuffed toys. Banks also like to do this to make sure that no ones feeding you money like if your parents are “employing” you every month and giving you $10k a month. Banks wanna make sure that the money you’re making is recurring and stable. This is also goes to show that if you’re earring $8k a month that you’re not spending $12k a month.

• Cash reserve. Another thing a bank would possibly want to see is 2-6 months of cash reserves. This is to make sure that you don’t just buy this deal and then the next month you’re having foreclose on your house.

OK now lets talk about how save up enough money. If you wanna buy real estate, you’ll wanna put some money down. Banks like to see that you risk your own money on the deal. And the initial money that you put down gives you your equity in the property. 

Traditionally first time buyers do 20% down. But there are options out there where you can put 3%-15%. The downpayment is supposed to give banks cushion in the event that if your property foreclosed, you’d take whatever percentage you put down as a loss. 

Now if you were to pay less 20% down on your property, you’re gonna have to pay a little something called PMI. Private Mortgage Insurance. This is an extra fee bank added on to your loan to ensure that you’re not going to foreclose on the deal since you less money put into deal. Having PMI on your loan doesn’t mean that it’s the end of the world. Unfortunately it doesn’t go into your equity and most times you’re able to pay it in full whenever you can. If you’re confident that market is going continue to grow, it might be worth to jump into the deal as apposed to purchasing later. It’s a bit of risk! So how you get rid of the PMI is by paying down 20% of the loan and then you can refinance to get rid of it. 

Now some of you out there are like well my brother in law’s uncle’s grandma bought a house with an FHA loan. If you do get accepted to close on a 3.5% or 5% down plan then freaking congrats to you! Go for it! Own it! It totally comes down to your income bracket, area you’re buying in, and how competitive that area is. 

Despite the fact if you’re putting 5% down or 20%, my saving strategies are the same:

Make saving a priority.

You’re gonna have to downscale your expenses and hold back from buying oat milk lavender iced lattes. The most important thing to consider is your income in relation to your expenses. This is why banks wanna see your statements, how much you’re making or spending. Anytime it comes to saving, the best and biggest thing you can do is track you’re finances. I can’t stress this enough. You gotta know what money is going out and what’s coming in. The best way people end up saving money is discovering little tiny expenses that add up over time and can equal a ton of cash you could’ve saved. You will find a whole bunch of cash that you can save once you start doing this.

Automate your savings.

The money is automatically saved into your bank account so it doesn’t even touch your checking account. This is the best way to save money! I have my business account where I deposit all my money into and then from there I have a set amount that I pay myself every month that goes into my checking. And a portion of that automatically goes into my savings. I recommend this to everyone. Something that I’ve learned through research is that banks don’t want you to pay more than 44% of your net income on your mortgage.

Cut back on expenses.

When it comes to saving, it’s all about cutting back on things that you really don’t need as much as possible. This is how I was able to do it. I lived at my parents house the first three years of college, and I’d take most of income and stash it into my savings. Live below your means so you can get the thing you want which is a house in this case. 

For the ones saying I can’t do it I can’t save anything:

Track your expenses on Mint. You should be able to find things that you can cut back on.

You need to earn more money. There’s no way to sugarcoat it. 

The truth is that you have to sacrifice a lot. You have to increase your income as much as you can and decrease your expenses as much as possible.

It might be worth it to have part time job, side hustle, or expand your skills. 

If you do start to make more money, make sure that you don’t start spending more but to save the difference!

I do believe that if you want it bad enough, you’ll find a way to make it happen.

Should you just invest your down payment? Wouldn’t you just make 8-10% interest? Well it’s hard to know because no one really knows what’s gonna happen with the market.  If I’m investing in the market for the long run, 10+ years, then it’d be wise to do that. 

Patience, dicipline, and consistency is worth it. Track your expenses. Save as much a you can. Delay gratification. Is it worth? Yes, it is so worth it.

Thanks for reading. Please make sure to like and share! It helps out a lot, and subscribe to my channel! See you soon.