This week, good friends and clients of mine Andrew Testa and Jennifer Rivera were featured on CNN Money for a story about how they were able to buy their dream home at 25. I worked with them recently to help them find their three-bedroom, two-bath, â€œdream homeâ€ in Denville, NJ.
The CNN producer for the segment was amazed that at such a young age they could have the wherewithal and ability to afford a home.Â There are a lot of lessons that buyers can learn from Andrew and Jennâ€™s experience.Â Here are the five tips on how to prepare to buy your dream home regardless of age.
Save, save, save â€“ Andrew and Jenn were frugal before it was even cool to be frugal.Â Once the â€œgreat recessionâ€ hit, it became in vogue to be economical, to cut back on Starbucks and buy a car with good gas mileage but Andrew and Jenn were well ahead of the times.Â Both of them worked through high school and college, commuted to school living with Mom and Dad instead of staying on campus and socked money away while friends were blowing money at bars and fancy dinners.Â They remind us that a penny saved is indeed a penny earned.Â
Give them credit â€“ Having good credit matters.Â Having clean credit greatly helped Andrew and Jen not only get a mortgage but also get a very competitive interest rate.Â Your credit is the first thing that a bank is going to look at when considering you for a loan.Â Building up credit by making on-time payments on credit cards, car payments, a rental apartment or other debt can help build your credit.Â Not only building credit but protecting it by making payments on time, not carrying high credit card balances, and ensuring that no judgments are made against you is critical to maintaining clean credit.Â
Pay off debt â€“ Before buying a home and paying for their impending wedding, Andrew and Jenn religiously paid off their school debts before accruing the new debt of a mortgage.Â Having their debt paid off made them more attractive from a mortgage lenderâ€™s perspective and allowed them to focus on saving the five percent that they would ultimately be the down payment on their new home.Â
Buy what you need â€“ When Andrew and Jenn moved into their new home they â€œbought the bare essentials.â€Â While they had the money to afford their new home, they didnâ€™t throw caution to the wind and become spendthrifts; they purchased â€œpractically brand new couchesâ€ for cheap on Craigslist and continued to stay frugal, using the same philosophy that helped them buy the house, as they knew it would ultimately provide them with long-term financial success.Â
Be willing to make sacrifices â€“ Would you like to watch this yearâ€™s Superbowl on a 60-inch, flat screen TV with 3D capability â€“ sure, most of us probably would, but what else could that money be used for?Â Andrew and Jenn held off making luxury or want-to-have purchases in the short term, in an effort to make the very BIG purchase of their dream home.Â And as Andrew said best, â€œall those little financial decisions add upâ€¦â€Â
To see Andrew and Jennâ€™s story in their own words, check out their video here.