Home Buying for Young People

April 18, 2012 by  Filed under: Loans 

Renting has always been a popular option for young people. They don’t usually have a lot of money saved for a down payment and, besides, they’re not always committed to a specific place since they know their careers could take them just about anywhere. Renting, however, has become even more prevalent amongst young people over the past several years because they do not qualify for mortgages that can help them purchase homes. If you want to buy a home, then you might want to consider some of the following strategies.

Save Heavily for a Large Down Payment

If you can put a large down payment on a home, then lenders know you are serious. It shows that you can commit to saving, that you know how to use money wisely, and that home ownership is an important goal for you. Plus, a large down payment means that you don’t have to borrow as much money to purchase a home. Lenders are much more willing to give young borrowers smaller amounts of money to purchase reasonably priced homes. If you go in without any savings and you want to borrow a lot, then you won’t have much luck from a reputable lender.

Turn to Your Parents for Help

No young adult likes to turn to his or her parents for financial help. Of course you want to feel independent and show them that you can make it on your own. In many cases, though, borrowing from your parents is the smartest thing you can do.

Parents can give their children up to 13,000 a piece before paying gift taxes. If the child is married, they can give twice as much, 26,000. Knowing this could make parents more agreeable to lend money.

Use Parent-funded Mortgages

If your parents have enough money, then they could fund the entire purchase of your house. This doesn’t mean that they just buy you a house. Very few parents can afford that because they have to think about funding their retirement years. Turning it into a loan, however, could benefit the parents and the borrowing young adult. The young adult gets money now to purchase a home, which means he or she doesn’t have to throw money away on rent every month. At the same time, the parents can earn interest on the loan. Ideally, the young adult would pay enough interest on the loan to replace what the parents would have made from their retirement fund.

Whether you choose to go it alone or ask a relative for help, there are definite benefits to purchasing a home now instead of renting. Homes are long term investments that can make you more financially stable throughout life. Explore your options to find a funding route that makes sense for your unique situation.

Tomorrow Finance provides tools for home loan comparison from Australia’s best lenders. When you find the best home loan package, you save!

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