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How to buy a home when you’re only 23

Only 2 years out of college, Amy was ready to buy a home. A low down payment helped her do it.

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By the numbers, my niece Amy is a typical Millennial: she’s 23, she graduated from college 2 years ago, and she pays $321 in student loan debt every month. Her interests include bike riding, guitar, Saturday brunch and beer tastings. She’s a sales manager for an international food distribution company and she rents an apartment in downtown Grand Rapids, Michigan.

One thing that is not typical about Amy: she just bought a house. With lots of news coverage about how Millennials can’t afford to buy homes, it might seem like Amy is ahead of the curve. I asked her why and how she did it.

Saving money was the biggest reason. My friend Mike just bought a house and his mortgage is $300 less than his rent! When I heard that, I was definitely interested. Plus, I need a tax deduction!” Amy said. She currently pays $1,440 a month in rent.

She already saved enough for a 5% down payment. Amy tapped into a financial calculator to figure out if she should buy now or wait to save for a bigger down payment. “My dad really wanted me to save enough to put 20% down. But I showed him that it could take me 8 years to save that much money! In that time, I could build up $63,000 in equity or spend $140,000 in rent payments,” Amy explained.

Student loan debt was an advantage. Amy has been conscientiously paying her college loan every month since she graduated in 2015. “My loan officer said that because I have been paying consistently, it worked in my favor and boosted my credit score. She also said that I can obviously stay focused and live within a budget,” she said.

Credit history started when she was 16. Thanks to her mom’s advice, Amy applied for a credit card when she was still in high school, used it and then paid it off every month. Amy’s credit score is now 771.

Private mortgage insurance was her friend. Amy explained, “Okay, one of the reasons my dad wanted me to save for a 20% down payment was so I would avoid paying private mortgage insurance. Maybe I could have put more down, but I didn’t want to deplete my savings. What if something breaks in my new house? Or what if I want to buy a new sofa? So PMI helped me buy my house with only 5% down.”