The thought of purchasing a home intimidates almost everyone, regardless of age. Add “first-time homebuyer” to that equation, and the anxiety levels are likely to soar. Although in Singapore we complain a lot about expensive property prices but we are not the only ones. My friends in USA were telling me that not only do they have oppressive student loan debt, uncertain job prospects/career arcs, the real estate prices in the Phoenix/Tucson areas further complicates home buying for Arizona Millennials in their 20’s.
But the fact is that we are already in debt!
They were sharing with me that most millennials in USA face a mountain of student loan debt upon graduation from college. The average student loan debt of all 2016 graduates was just over $37,000. Approximately half of the students in Arizona graduated with student loan debt and that total was approximately $23,000.
You want them to add MORE debt?
Adding a six-figure loan to a someone facing a mountain of student loan debt may seem like a one-way ticket to a bankruptcy filing. However, it could turn out to be one of the more savvy financial decisions you can make…especially for someone in their 20’s. There are thousands of homes listed for sale in the Phoenix/Tucson areas and many of them cost less than $100K. While homeownership isn’t for everyone (and each one of you should decide the answer to that question for yourself and/or your significant other)—owning a home brings stability and peace of mind to many people.
How do you get there?
BUDGET!! BUDGET!! And BUDGET some more. All kidding (and shouting) aside, adopting a good budget and living within it are keys to being able to own a home. Make saving money a priority—though not at the expense of fun and actually living your life. You don’t have to go back to your diet of ramen noodles while taking classes in Tucson or Tempe but you do need to save where you can.Perhaps lower your gourmet coffee purchases ($5 per cup at 22 days of work a month equals more than a C-note). Saving on the little things adds up to bigger things…quickly.
Pay off your credit card debt!
Don’t even think about buying a house until you have your credit cards paid off in full. The interest rate on credit cards is astronomical (15–25% or more). If you have a choice of saving for a house or paying off your credit cards, pay off the cards. The interest on those cards is killing you. By way of comparison, the interest rate as of September 2017 for a 15-year home loan was just over 3%.
Next steps.
Once you’ve established a budget and cleared your credit card debt, it’s time to start looking for a house. Remember to buy a house that allows you to live within your means! Don’t start looking at quarter-million dollar homes if you make $40K a year! Ideally, you should look for a house whose asking price is approximately 2.5–4x your annual salary. This might involve a fixer-upper or some other trade off—but don’t lose sight of the fact that the house must fit within your budget.
Most people use one of the popular real estate sites (Zillow, Realtor.com, etc) for their searches. Once you’ve found a potentially suitable house, you might want to check out the property records in Arizona for information on the property in addition to asking your realtor about it.
Once you’ve paid off your credit card debt, set a working budget and saved some money (home purchases don’t always require a massive down payment), you can realize the America dream of home ownership.