How to Get a Mortgage in Your 20s

You’re a twentysomething and are considering buying a place. Maybe you moved back in with your parents to save for a down payment—or you’re living in a rental that gobbles up a huge chunk of your first grown-up paycheck, and you don’t feel that you have anything to show for it. Unless Mom and Dad are rich, or your great-aunt left you a trust fund, or you’re a brand-new internet mogul, you probably won’t be able to buy a home without taking on some debt.

That’s when it’s time to consider a mortgage—likely to be the biggest debt that you ever take on in your life. Acquiring a mortgage, especially this early in your life, ties up a lot of your money in a single investment. It also ties you down and makes it less easy to relocate. On the other hand, it means that you’re starting to build up equity in a home, provide tax deductions, and can boost your credit history

Key Takeaways

  • Getting a mortgage in your 20s allows you to start building equity in a home, provides tax deductions, and can boost your credit score. 
  • The mortgage process, however, is long and thorough, requiring pay stubs, bank statements, and proof of assets. Pre-approval helps to make twentysomethings more appealing homebuyers to sellers. 
  • Twentysomethings need to have enough credit history to qualify for a mortgage, which means handling debt responsibly early on and making timely student loan payments. 
  • Borrowers in their 20s may find it easier to get a mortgage through the Federal Housing Administration (FHA) or the U.S. Department of Veterans Affairs (VA).

Click Play to Learn How to Get a Mortgage in Your 20s

What Is a Mortgage?

In simple terms, a mortgage is a loan used to buy a home where the property serves as collateral. Mortgages are the primary way that most people buy homes and also can be used to purchase investment properties. The total outstanding mortgage debt in the United States was approximately $17.26 trillion in the second quarter of 2021.

A mortgage is a type of secured debt, meaning that if you fail to pay what’s owed, then you risk losing your collateral. This typically happens through the foreclosure process, in which a lender seeks to take back the home to recover unpaid mortgage debt.

Like other loans, mortgages have an interest rate and an annual percentage rate (APR). There are also fees involved in getting a mortgage, including origination fees and closing costs. Lenders typically expect homebuyers to make a down payment toward their home loan, though the amount required can depend on the type of mortgage.


Twentysomething homebuyers can help with their down payment through down payment gifts from family members, but these must be properly documented.

How to Get a Mortgage: A Step-by-Step Guide

Unlike opening a credit card or taking on an auto loan, the mortgage application process is long and thorough. Therefore, it helps to understand what steps are involved and what’s expected if you’re planning to buy a home in your 20s.

Estimate What You Can Afford

Before you apply for a mortgage, it’s important to understand what you can realistically afford to pay. This includes estimating both the up-front and ongoing costs of buying a home in your 20s. Using a mortgage calculator is a good resource to budget these costs.

The main costs of homebuying and homeownership include:

  • Home appraisal fees.
  • Inspection fees.
  • Down payment.
  • Closing costs.
  • Monthly mortgage payments, including private mortgage insurance (PMI) if you’re required to pay it.
  • Homeowners insurance, property taxes and homeowners association (HOA) fees if these are not escrowed into the mortgage payment.
  • Basic maintenance and upkeep.
  • Home repairs and renovations.

One of the biggest hurdles for first-time homebuyers is the down payment. You’ll need a down payment of at least 20% to avoid PMI on a conventional home loan. PMI premiums offer protection to the lender in case you default; they can’t be removed until you reach 20% equity in the home. This will add to your home’s monthly carrying costs.


Using a mortgage calculator can help you estimate monthly payments, down payment requirements, and closing costs to get a better sense of what you can afford.

Organize Your Documents

You will need several pieces of information to apply for a mortgage. Before going in, be ready with your Social Security number, your most recent pay stub, documentation of all your debts, and three months’ worth of bank account statements and any other proof of assets, such as a brokerage account or a 401(k) at work.

If you’re self-employed, then you may need additional documentation. For instance, a lender might ask to see your tax returns for the previous two years. You may also need to provide an up-to-date cash flow statement and/or letters from one or more freelance clients attesting to the fact that you’re an independent contractor.

Compare Mortgage Options

Mortgage loans are not all the same, and it’s important to understand what type of mortgage might be best when buying a home in your 20s. You can start by looking into conventional loans, which are backed by Fannie Mae or Freddie Mac. These loans typically require 20% down to avoid PMI.

Next, you could consider Federal Housing Administration (FHA) loans. Loans through the FHA generally require smaller down payments and make it much easier for borrowers to refinance and transfer ownership. You also may be able to qualify for an FHA loan with a lower credit score than what might be required for a conventional loan.

There’s also the U.S. Department of Veterans Affairs Home Loans guaranty service, which is perfect for twentysomethings returning from military service. VA home loans make it much easier for veterans to buy and afford a home; many of its loans require no down payment. The home you choose, however, will be subject to a rigorous inspection.

Shop Around for a Home Loan

Just like all mortgages aren’t alike, all lenders also are not the same. It’s important to shop around for different mortgage options so you can compare interest rates and fees. A difference of even half a percentage point could substantially increase or decrease the amount of interest that you pay for a mortgage over the life of the loan.

Also, consider getting pre-approved for a mortgage. This process involves having a mortgage lender review your finances and make you a conditional offer for a loan. Pre-approval can make it easier to have your offer accepted when you try to buy a home, which could be especially crucial if you’re the youngest bidder


If pre-approval requires a hard credit check, that could impact your credit score.

When Is the Right Time to Buy?

Figuring out when to take out a mortgage is one of the biggest questions. Unless you somehow already own a home through divine providence, you’ve probably been paying rent and changing residences every couple of years or so. Here are some factors to consider when deciding when to take out a mortgage. 

Where Will You Be in Five Years? 

A mortgage is a long-term commitment, typically spread out over 30 years. If you think that you’ll move frequently for work or plan to relocate in the next few years, then you probably don’t want to take out a mortgage just yet. One reason is the closing costs that you have to pay each time you buy a home; you don’t want to keep accumulating those if you can avoid it.

How Much Real Estate Can You Afford? 

What would you do if you lost your job or had to take many weeks off due to a medical emergency? Would you be able to find another job or get support from your spouse’s income? Can you handle monthly mortgage payments on top of other bills and student loans? Refer to a mortgage calculator to get some idea of your future monthly payments, then measure them against what you pay now and what your resources are.

Tax breaks help reduce the effective cost of a mortgage, where mortgage interest paid is tax deductible. 

What Are Your Long-Term Goals? 

If you hope to raise kids in your future home, check out the area for its schools, crime rates, and extracurricular activities. If you’re buying a home as an investment to sell in a few years, is the area growing so that the value of the home is likely to increase?

Answering the tough questions will help you determine which type of mortgage is best for you, which can include a fixed-rate or adjustable-rate mortgage.

A fixed-rate mortgage is one in which the interest rate of the mortgage stays the same for the life of the loan.

An adjustable-rate mortgage (ARM) is one in which the interest rate changes at a set period according to a specified formula, generally tied to some kind of economic indicator. You might pay less interest in some years and more in other years. These generally offer lower interest rates than fixed loans and might be beneficial if you plan to sell the home relatively soon.

Benefits of Homeownership in Your 20s

Buying a home in your 20s could make sense if it would save you money compared to paying rent and if you’re looking for a long-term investment. The longer you plan to stay in the home, the longer your time frame for gaining equity as your home’s value increases.

If you choose a fixed-rate mortgage, then your payments will remain consistent for the life of the loan, rather than being subject to price hikes the same way you might be as a renter. You’ll be able to customize the property according to your tastes and make improvements or renovations as you see fit. And you’ll get the benefits of a tax deduction for mortgage interest while you’re paying on the loan. Of course, there are some potential downsides to consider.

  • Owning a home could be less expensive than renting, and a fixed-rate mortgage could offer stability and predictability with payments.

  • The younger you are, the longer you have to build equity in the home as the property’s value increases.

  • Paying a mortgage on time each month could help to improve your credit score and make it easier to qualify for other types of credit.

  • You may not recoup your down payment or closing costs in the form of monthly savings if you don’t stay in the home for the long term.

  • Qualifying for a mortgage as a twentysomething can be challenging if neither your credit history nor your work history is solid.

  • Having student loan debt, credit cards, or other debts could make meeting monthly mortgage payments more difficult.

Making a Mortgage More Affordable

There are a handful of ways to reduce the price tag associated with a mortgage. The first is tax breaks, where the interest you pay on your mortgage is tax deductible. You’ll need to itemize your deductions to take advantage of this tax break.

You can also reduce your mortgage costs by putting 20% or more down. The more you put down, the less you have to borrow, which can reduce your monthly mortgage payment. Improving your credit score can also help if it allows you to qualify for a lower mortgage interest rate.

Lenders will scrutinize your credit score and history, which may be problematic for twentysomethings who have little to no borrowing history. This is where having student loan debt actually helps you—if you’re making your payments on time, then you’ll likely have a good enough credit score for banks to feel comfortable lending to you. Generally, the better your credit score is, the lower your interest rates will be.


Refinancing student loan debt could help to reduce your interest rate and lower your monthly payment so that a mortgage is more affordable.

The Bottom Line

Homeownership can seem like a daunting prospect, especially as you’re starting your career and still paying off your student loans. Think long and hard before you take out a mortgage; it’s a serious financial commitment that will follow you until you either sell the property or pay it off decades from now. But if you’re ready to stay in one place for a while, then buying the right home can be financially and emotionally rewarding. 

Article Sources
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  2. Consumer Financial Protection Bureau. "What Is the Difference Between a Mortgage Interest Rate and an APR?"

  3. Freddie Mac Single-Family. “Mortgage Products.”

  4. Fannie Mae Single Family. “Mortgage Products.”

  5. Internal Revenue Service. "Publication 936 (2020), Home Mortgage Interest Deduction."