According to a recent industry survey, a portion of young homebuyers ranging from 25 to 40 are unsure about the process of homeownership and what they can afford. The data shows that one in four underestimated their buying potential by $150,000 or more, one in four underestimated the increase in value by $100,000 or more, and 47% don’t know what a good interest rate is.
These uncertainties can cause young people to give up their dreams of owning a home — don’t let it happen to you! If you’re interested in buying but aren’t sure where to begin, take a look at the following three truths about homeownership that you should understand before you embark on your journey.
1. 20% Isn’t Necessary for a Down Payment
The National Association of REALTORS®’ recent Home Buyers and Sellers Generational Trends Report found that the median down payment for homes purchased from July 2019 to June 2020 was only 12%. When controlled for age, that number gets even lower: buyers aged 22 to 30 only put down a median 6%.
2. You May Be Able to Afford More Than You Think
Some young people don’t feel they can afford a home that fits their needs, so they continue renting. However, doing so will rob them of the long-term benefits of homeownership. A recent article from the NAR explains, “Many young adults are underestimating how much they need for homeownership…Millennials underestimated how much home they can afford right now, how much interest they would pay over a 30-year mortgage, and how much home values appreciate, on average, over 10 years.”
3. The Longer You Wait, the Less Affordable Homeownership Will Be
Mortgage rates are projected to rise in the next few months, so buying a home now could mean the difference between a near-historic low interest rate and a less desirable one. Freddie Mac Chief economist Sam Khater notes, “As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.” Even the smallest increase can influence your buying power, so the sooner the better.
If you’ve been on the fence about buying a home, there’s no time like the present. Contact Gary to guide you through the process of finding your dream home.
Source: Keeping Current Matters