How Old Do You Have to Be to Buy a House?
In most states the minimum age to buy a house is 18 years old, which is when individuals reach the age of majority and have full legal rights.
However, when considering their readiness to buy a house, first-time homebuyers should weigh other factors besides their age, such as their financial preparedness and level of understanding about homeownership responsibilities. We’ll look at what to consider when determining if you’re ready to buy a house.
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Common loans for young homeowners
Sure, the average American home buyer is in their mid-30s, but there’s no reason you have to wait that long. Once you’ve reached the age of majority — 18 years in most states — you can legally purchase a home. But unless you have the cash lying around, buying a house when you’re young will likely mean taking on a mortgage. Fortunately, there are many good home financing options available — regardless of your age. Here’s a look at some popular loan options for young and first-time homebuyers.
States where the age of majority is not 18
There are a few states where the age of majority is higher than 18:
- In Alabama and Nebraska the age of majority is 19
- In Mississippi the age of majority is 21
Looking for a U.S. state where the age of majority is lower than 18? Unfortunately, you’re not going to find one. However, you should also know that it is legal for a minor to own real estate — they just aren’t allowed to buy or sell real estate.
FHA loans
Mortgages backed by the Federal Housing Administration (FHA) are popular with young homebuyers, as they come with low down payment requirements and lenient credit qualifications. Borrowers don’t have income limits; however, loan amounts are subject to FHA loan limits for the area where the home is located.
FHA loan requirements
- Minimum credit score: 580 with 3.5% down; 500 with 10% down
- Minimum down payment: 3.5% with a 580+ credit score; 10% with a 500-579 score
- Mortgage insurance: 1.75% upfront premium; 0.15% to 0.75% annual premium
Good news for borrowers paying FHA mortgage insurance
FHA mortgage insurance recently got cheaper. As of March 20, 2023 the FHA reduced its annual insurance premiums by 0.30 percentage points. That’s good news for the average FHA borrower, who will save around $800 per year as a result.
USDA loans
Borrowers purchasing in designated rural areas can access mortgages backed by the U.S. Department of Agriculture (USDA). Aimed at low- and moderate-income borrowers, USDA loans have no down payment requirement but are subject to income and location limits.
USDA loan requirements
- Minimum credit score: No program minimum (but most lenders require a 640 credit score)
- Minimum down payment: No minimum down payment
- Mortgage insurance: 1% upfront guarantee fee; 0.35% annual guarantee fee (no fee in the USDA Direct Loan program)
VA loans
Active-duty service members, veterans and eligible surviving spouses can get a home loan backed by the U.S. Department of Veterans Affairs (VA) with no down payment. VA loans also have flexible credit requirements.
VA loan requirements
- Minimum credit score: No program minimum (but most lenders require a 620 credit score)
- Minimum down payment: No minimum down payment
- Funding fee: 0.5% to 3.6%
- Mortgage insurance: None
Conventional loans
Mortgages that aren’t a part of a government program are called conventional loans. Typically, conventional loans are harder to qualify for than government-backed mortgages, but they usually have fewer fees.
Conventional loan requirements
- Minimum credit score: 620
- Minimum down payment: 3%
- Mortgage insurance: 0.14% to 2.33% (if putting less than 20% down)
Credit score under 680? Conventional rate changes in 2023
A higher credit score generally means a better interest rate — and while this is still true, beginning on May 1, 2023, conventional loan borrowers with a credit score between 640 and 680 have faced less of a penalty for having imperfect credit than they used to. That’s good news for many — including young adults who haven’t had as much time to build their credit as the average home buyer — who may have struggled to get an affordable mortgage.
First-time homebuyer programs
New buyers can also access numerous first-time homebuyer programs. These programs exist to help alleviate the challenges of purchasing a first home, but they all have varying qualification requirements. Sometimes, borrowers must buy a property from specific listings or use a particular loan type.
Fannie Mae HomeReady
HomeReady is a conventional loan program for low- and moderate-income homebuyers. These loans feature low down payment minimums and reduced mortgage insurance premiums.
HomeReady requirements
- Minimum credit score: 620
- Minimum down payment: 3% minimum down payment
- Borrower’s income: Limited to 80% of the area median income (AMI)
Freddie Mac Home Possible
Another conventional loan option for lower-income homebuyers is the Home Possible program. These loans also have low down payment requirements and discounted private mortgage insurance (PMI). Home Possible loans are also available to borrowers who don’t have credit scores but can make a higher down payment.
Home Possible requirements
- Minimum credit score: 660 minimum credit score
- Minimum down payment: 3% minimum down payment
- Borrower’s income: Limited to 80% of the area median income (AMI)
Good Neighbor Next Door
The U.S. Department of Housing and Urban Development (HUD) offers discounts for buyers working in specific public service professions to purchase a HUD home. Borrowers receive a 50% discount on the property; in addition, if they finance the home with an FHA loan, the minimum down payment is only $100.
Good Neighbor Next Door requirements
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- Eligibility: Available to law enforcement officers, pre-K through 12th-grade teachers, firefighters or emergency medical technicians
- Home type: Must buy a HUD Home
- Residency: Must live in the home for at least three years
Native American Direct Loan
Veterans who are Native American or have a Native American spouse can qualify for the VA’s Native American Direct Loan (NADL). Like VA loans, the NADL program has no down payment requirement, and borrowers receive lower rates and have limited closing costs.
NADL requirements
- Eligibility: Open to Native American veterans and veterans with a Native American spouse
- Minimum down payment: No minimum down payment
- Minimum credit score: No minimum credit score (however, lenders look for a 620 score)
First-time homebuyer programs in your state
In addition to national loan programs, many state and local governments and community organizations offer first-time homebuyer initiatives. Program features vary, but often include loans, down payment assistance or tax incentives. Borrowers can view state and local programs via the HUD website.
Am I ready to buy a house?
If you’ve reached the age of majority in your state, you can legally buy a home — but that in itself doesn’t prepare you for homeownership. Whether you’re ready to buy a house has less to do with your age and more with your capacity to handle the responsibility of homeownership.
Consider these factors to help you determine if you’re ready to purchase a home.
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- Income history: If you have a good income right now, you’re on the right track. Still, you should also consider your employment history — lenders typically look for two years of steady employment when they approve you for a mortgage, not just your current income.
- Debt-to-income ratio: Lenders will also review your debt-to-income (DTI) ratio — the sum of your monthly debt payments (including the mortgage) divided by your monthly pre-tax income. A DTI ratio of 35% or lower is considered “good” and will likely qualify you for most loan programs, although many mortgage types allow for a much higher ratio. For example, FHA loans require a ratio of 43% or lower, but will allow up to 50% in some cases. This is good news for young buyers, who may have a high DTI ratio due to student loans.
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- Higher credit score: Not only does your score determine your loan options, but having a score above the minimum for your program can also reduce your loan payment or offset other loan requirements. For example, FHA borrowers with scores of 580 or higher can put as little as 3.5% down, but borrowers with scores between 500 and 579 have to put at least 10% down. Similarly, HomeReady loans have a minimum credit score of 620, but borrowers with scores of 680 or higher pay less PMI.
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Fannie Mae and Freddie Mac institute new credit score bands
Beginning May 1, 2023, Fannie Mae and Freddie Mac – the agencies that set the guidelines for most conventional loans – changed how they charge certain fees that are based on credit score. These changes have pushed the credit score you need to get the best prices up from above 740 to 780 or higher.
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- Down payment: Except for VA and USDA borrowers, most buyers will have to put some money down, so whether you have enough funds for a down payment plays a significant role in your readiness to buy a home. Fortunately, many loan programs have low down payment minimums, such as FHA loans (3.5%) and some conventional loans (3%).
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→ However, putting more money down (if you can) will benefit you. With conventional loans, the more you put down, the less you pay in mortgage insurance, and putting 20% down avoids PMI altogether. With FHA loans, a higher down payment can offset a lower credit score. The size of your down payment also affects the risk-based fees charged on conventional loans, which in turn can affect your interest rate or closing costs.
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- Additional savings: Whether you have enough savings beyond the down payment and closing costs can help determine if you’re ready to buy a home. For some loan programs, lenders will check if you have cash reserves on hand to handle the financial obligations of the mortgage and potential emergencies. Expected cash reserves can be as much as six months of mortgage payments, depending on the loan and the property you’re buying. Having significant savings can offset a lower credit score, high DTI ratio or small down payment.
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Pros and cons of buying a house young
According to data from the National Association of Realtors, the typical first-time homebuyer is 36 years old — the highest age on record. Despite the increasing age of new buyers, there are many benefits to buying a home early into adulthood — though there are downsides, as well. Here’s a look at the pros and cons of purchasing a house when you’re young.
| Pros | Cons |
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Builds home equity. With each mortgage payment, you’ll build home equity. This increases your assets and overall wealth, and provides equity you can leverage if needed. Provides stability. Owning a home protects you against potential rent increases and unexpected moves, while also providing security. Can improve your credit history. A mortgage adds to your mix of credit types, a factor in calculating your credit score. Potential tax benefits. Mortgage interest is tax deductible, potentially saving you on your taxes. Provides independence. You can tailor your home to your preferences without any limitations. | Responsible for repairs and maintenance. You’ll have to handle the responsibility and costs of routine home maintenance and unexpected repairs. Less flexibility. You’ll be locked into one location without the flexibility to move easily. May pay higher interest rates and fees. If you don’t have the savings or established credit history to qualify for a cost-effective mortgage, you may have a loan with high fees or interest rates. Reduced cash flow. Committing to a mortgage can limit your cash flow and ability to save while young. |
Mortgage age limit: At what age can you buy a house?
Young homebuyers aren’t the only ones asking how old you have to be to buy a house — older homeowners also often wonder if there’s a maximum age for purchasing a house. The good news is that, as long as you’re above the age of majority and you can meet the financial requirements of a home, you can take out a mortgage. Plus, older homebuyers have access to age-specific loan products such as reverse mortgages, which are only available to seniors 62 and over.
But while purchasing and financing a home later in life is possible, homeowners should still consider its benefits and drawbacks. Buying a home can give aging homeowners stability and provide an asset to pass on to heirs or leverage as a source of income, such as through a reverse mortgage.
On the other hand, managing a property could become burdensome as a homeowner ages, and qualifying for a mortgage can be challenging if income is limited. In addition, taking on a home loan can eat up assets, as a homeowner’s estate will need to either sell the house or pay off the loan to satisfy the mortgage when they pass.