Although my husband happened to buy a house when he was 23 years old, most people I know didn’t become homeowners until their very late 20s or during their 30s. My friends Erin and Steve didn’t buy their first home until they were in their mid-40s — even though they got married in their late 20s. But waiting turned out to be the best decision they could’ve made.
When there’s not enough money to afford homeownership
Erin and Steve thought about buying a home shortly after they got married. But the timing wasn’t right.
Erin wound up with a surprise pregnancy within a year of tying the knot. Given her moderate income, losing most of her paycheck to daycare didn’t make financial sense. So she stopped working for a period to care for her daughter, as well as the son she had a couple of years later so her children would be close in age.
Erin and Steve could swing their basic expenses, including rent, on Steve’s income alone. But buying a house on one salary was a huge stretch. And thankfully, they recognized that.
Both Erin and Steve also still had left debt from college to tackle when they were first married. They didn’t want to take on a mortgage until they were debt-free.
They then thought about buying a home later on in their 30s. At that point, Erin was back at work and they had more money coming in. But they didn’t have a lot of savings, and they certainly didn’t have enough for a 20% down payment on a home in their preferred neighborhood.
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It’s possible to buy a home with less than 20% down, but you’ll pay private mortgage insurance, or PMI, which is yet another ongoing expense to deal with. So all told, they wanted to wait until they could easily put 20% down on a home, plus have a nice cushion for all of the extras that would inevitably come with owning one, like property taxes, homeowners insurance, and maintenance.
Waiting until the time was right
It took Erin and Steve until their mid-40s to feel comfortable buying a home. But that was the smartest thing they could’ve done.
By waiting until they had more savings, they were able to easily cover a 20% down payment on a home to avoid PMI. And, they had a nice amount of money left over to cover repairs.
That was crucial, because they bought a home that needed some work. But they didn’t have to take out additional loans to pay for renovations and anything that needed to be fixed, like their mess of a driveway.
Also, by the time they bought their home, Erin had been back to work for a while and was earning a lot more than what she made when she first returned to a job. That gave her and Steve more confidence in their ability to cover their housing expenses without stress.
It’s best to buy when you’re financially stable
The sooner you buy a home, the sooner you can start to build equity in it. So you may be tempted to try to buy earlier in life than your 40s.
But you may end up earning a lot more money in your 40s than in your 20s or 30s, which could make it easier to keep up with your expenses. And the longer you hold off on buying a home, the more you can save for not just a down payment, but other homeownership costs.
Almost shockingly, 23% of homeowners say they spend over 30% of their income on expenses like home maintenance, improvements, taxes, insurance, and utilities, according to Real Estate Witch. That’s not even including mortgage payments.
Meanwhile, the general consensus is that you should limit your total housing costs to 30% of your income or less. So waiting until you have more money saved and your income is higher could help you avoid falling behind on homeownership expenses. Also, you don’t want to spend so much on a home that there’s no money left over for other things you enjoy, like taking vacations, going to the movies, and so forth.
Of course, the one drawback of buying a home in your 40s is that it may not be paid off before retirement if you buy with a 30-year mortgage. Erin and Steve got around that by signing a 15-year loan, so they’re on track to be mortgage-free before their careers end. And they’re able to afford higher monthly payments due to waiting until their incomes were higher to buy.
If you can comfortably afford to buy a home in your 20s or 30s, then by all means, go for it. But be honest with yourself, like Erin and Steve were at those stages of life. If you can’t manage to keep your housing costs to 30% of your income or less, it’s best to wait.
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