I bought my first home at 23 on a low income and average credit score – how you can too
A SUPER saver has revealed how she bought her first home at the age of 23 on a low income and with an average credit score.
Jazmin Bautista on YouTube explaining how she saved money and prepared to buy the property last year.
However, the homebuyer said before you go house hunting, you must be prepared to offer up information on these four things:
- Your credit score
- Tax returns
- Bank statement
- Cash reserves
1. Credit score
Credit scores are important as banks will lend you money and must have proof that you are reliable.
Jazmin said her credit score was between 700 and 720 - which is not very high - due to some mistakes she made with her first credit card when she was 18.
However, she wanted to improve her credit score as it's imperative when purchasing a property, and aimed for 740.
2. Tax returns
Jazmin said she was asked for two years of tax returns when she applied for her mortgage.
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Banks do this as another way of proving you have the funds to pay off your potential mortgage.
One way that banks get paid is based on the mortgages they lend out.
If someone is unable to pay, the bank will then need to cover the cost.
So, in order for the bank to feel comfortable offering you the mortgage, they need to see that you have a steady income.
3. Bank statement
The first-time buyer provided two months of bank statements, but some banks require up to six months depending, on each person's personal circumstances.
Providing these documents is yet another way to prove you are reliable, stable, and not engaging in any illegal activity.
4. Cash reserves
On top of her down payment and closing costs, she managed to save $12,000, making it much easier for her to be given a mortgage.
She recommends having a nice chunk of change as this will give lenders the confidence that you have at least a few months' cash saved for your monthly payment.
Down payment assistance
Jazmin demonstrated how to calculate closing costs on the purchase of a house through the Bank of America website.
For example, if you were purchasing a house for $250,000 with a 30-year loan on a fixed rate of 5%, you'll need to have saved at least $12,500 for a down payment.
This means that your potential loan amount will be $237,500.
She was able to get her house with a 3.5% down payment because she graduated from a university and was not required to have a job that paid more than the minimum wage.
We've rounded up down payment assistance programs for first-time homebuyers in our guide.
How to start saving
After deciding she wanted to buy a house, Jazmine knew moving back home was the best way for her to save money on rent, bills, and food.
"You have to sacrifice financially things that most people won't do," Jazmine said.
If this isn't feasible for you, there are other ways you can make sacrifices that will add up.
For example, budgeting to pay off your debt is one of the best ways to prioritize your savings.
"I was living paycheck to paycheck I always thought that I did not have enough money to save, but the reality was that I was using my money to go out and eat, to go and buy myself new clothes, to go out and watch movies," Jazmine said.
Additionally, it may be helpful to automate your savings.
This means putting your money into a savings account.
Many times, you aren't able to withdraw for three to five business days which could motivate you to put more money in.
The first-time buyer also said those looking to buy should find other streams of income.
This could include side hustles or part-time jobs.
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