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How can I buy my first real estate property at a young age?
I'm currently am unsure of whether to continue contributing into a Roth IRA or open a HYSA to save up for the down payment.
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Justin Shapiro
Accounting | Finance | Financial Systems | Non-Profit Volunteer
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Hi Zhy,
Buying real estate at a young age is a fantastic goal, and there are a few steps and strategies that can help make it happen:
1. Saving for a Down Payment
High-Yield Savings Account (HYSA): This is a good choice for saving for a down payment because it keeps your money accessible and earns interest. You’ll need to save around 3-20% of the property’s price for a typical down payment, so an HYSA provides liquidity and security without risking your savings in the market.
Roth IRA: Although typically used for retirement, a Roth IRA allows you to withdraw your contributions (but not earnings) at any time without penalty. Additionally, Roth IRAs permit first-time homebuyers to withdraw up to $10,000 of earnings tax-free and penalty-free. This can be a backup if you need a bit more for the down payment, but using it solely for this goal might limit your retirement growth potential.
2. Strengthen Your Credit
A strong credit score can help you get better mortgage rates. You can build credit by managing a credit card responsibly, paying bills on time, and keeping a low credit utilization rate (under 30%).
3. Research First-Time Homebuyer Programs
Many states, including Pennsylvania, have first-time homebuyer programs offering lower down payments or reduced interest rates. Programs like FHA loans allow you to buy with as little as 3.5% down, though you may need mortgage insurance.
Best of luck!
Buying real estate at a young age is a fantastic goal, and there are a few steps and strategies that can help make it happen:
1. Saving for a Down Payment
High-Yield Savings Account (HYSA): This is a good choice for saving for a down payment because it keeps your money accessible and earns interest. You’ll need to save around 3-20% of the property’s price for a typical down payment, so an HYSA provides liquidity and security without risking your savings in the market.
Roth IRA: Although typically used for retirement, a Roth IRA allows you to withdraw your contributions (but not earnings) at any time without penalty. Additionally, Roth IRAs permit first-time homebuyers to withdraw up to $10,000 of earnings tax-free and penalty-free. This can be a backup if you need a bit more for the down payment, but using it solely for this goal might limit your retirement growth potential.
2. Strengthen Your Credit
A strong credit score can help you get better mortgage rates. You can build credit by managing a credit card responsibly, paying bills on time, and keeping a low credit utilization rate (under 30%).
3. Research First-Time Homebuyer Programs
Many states, including Pennsylvania, have first-time homebuyer programs offering lower down payments or reduced interest rates. Programs like FHA loans allow you to buy with as little as 3.5% down, though you may need mortgage insurance.
Best of luck!
Thank you for answering. I'm interested in the different options for purchasing an investment property. Would you recommend getting in early with an FHA loan with a 3.5% down and keeping it as a primary residence for the first 12 months, or waiting to enter the market later with a 20% down on a conventional loan?
Zhy