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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!