5 Steps to Take if You Want to Own a Home by 40

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It’s still possible to own a home by 40, but it’s a goal that requires planning and preparation. Here’s how to get started. 

The process of purchasing a home is, in itself, a complex and lengthy endeavor. But there is a lot involved in getting to the point where you’re ready and able to purchase a home.

Buying your own home is something you typically have to prepare for not just months, but years in advance. If you’re currently in your 20s or 30s, and you want to own your own home by the time you turn 40, here’s what you need to do now.

1. Get a credit card

If you are super, duper fortunate, you may be able to buy a house without a mortgage loan. With the median sales price of a house in the U.S. more than $416,000, however, chances are good you’re going to need some help from a bank.

You will have a significantly easier time getting a mortgage if you have a well-established credit history with many years of on-time payments. (Lenders will be more eager to give you a six-figure loan if they’re sure you can pay it back.) A good credit history will also give you access to lower mortgage rates.

One of the simplest ways to establish your credit is to get a credit card. Use it to pay for your everyday purchases, and pay it off in full every month before your due date. Wait six months, then get another card. Always pay in full, always well before your due date. Enjoy your purchase rewards while you watch your credit grow.

What cards do you pick? If you’re in college, student credit cards are fantastic starter cards. Otherwise, secured credit cards are easy to get even if you have no credit (though they require a deposit). You can also try getting a card from your current bank, as an existing banking relationship can often help you get your first card.

2. Open a high-yield savings account

Another move that can make getting a mortgage much easier is making a healthy down payment. Most experts recommend saving up 20% of the purchase price for your down payment. (This is the amount that is generally required to waive mortgage insurance, which is a costly extra fee that can hike your monthly payment.)

In most cases, it’s probably going to take a few years to build enough savings for your down payment. This isn’t quite enough time to expect to see good returns from something with a lot of short-term volatility, like the stock market, which is more often recommended for long-term savings.

Instead, the best place for your down payment savings is likely a high-yield savings account.

While high interest rates are bad for mortgages, they’re great for down payments. What I mean is, you can get a high-yield savings account with an APY in the 5% range, which not only helps you grow your savings, but will help protect it against the eroding power of inflation.

3. Set up automatic savings deposits

Once you have your high-yield savings account, it’s time to start, you know, saving.

I know this is easier said than done. Finding money to save, and doing it regularly, can be tough. That’s where automation comes in.

Most banks will let you set up automatic transfers. For instance, you could set it up so you automatically move $100 into your savings account every two weeks after you get paid.

Taking the thought out of it makes it easier to keep up with the habit. And you can set it up on any schedule — and, more importantly, for any amount — that fits your finances.

4. Take a first-time home buyers course

Some mortgage lenders will ask you to take a first-time home buyers course if you’ve never purchased a home before. But you shouldn’t wait until they ask for it.

Taking the time to go through an intro course — such as this free one from Fannie Mae — can help you learn some important basics about the home-buying process. And the earlier in your journey you gain those skills, the better off you’ll be.

It’s never too early to start learning what you need to know when it comes to something as important as your home.

You don’t (and shouldn’t) stop there, of course. Do some follow-up research on any questions or topics that seem relevant to you that crop up during your course.

5. Find an affordable market

The biggest cliche in real estate is “location, location, location,” but it’s a cliche for a darn good reason. Your ability to afford a house is going to entirely depend on where that house is located. What may be a great 20% down payment in one area could be barely 5% in another.

If your target market is in a high-cost-of-living area, you have an uphill battle. Your ability to reach that goal by 40 is going to depend a lot on your specific circumstances. If you’re in your 20s and already have a high-paying job, you’re probably on a good track. The older you are, the harder you will need to save to get there by 40.

If you’re priced out of your current area, it may be a good time to start thinking about where you’d like to live — and buy. Long-distance moves are extremely expensive, so it could be beneficial to relocate a year or two before you’re looking to purchase a home.

Defining your housing goal

Buying a home is a big deal. It takes a lot of prep and a ton of money. In other words, it’s not something that happens by accident. You need to make buying a home a goal that you consistently work toward achieving. This guide can help you figure out how to get started.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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