Home ownership is an exciting endeavor, but can be daunting for those who are new to the game. Millennials, in particular, may feel anxious and excited at the prospect of homeownership. And while there are plenty of talking heads out there claiming that Millennials are a generation of uninspired kids who are all stuck living at home with their parents indefinitely, there is plenty of information to dispel that myth.
Millennials may think that student loans or a seemingly anemic home market are barriers to homeownership, but there are plenty of opportunities for those willing to do their own research. Being a homeowner has so many wonderful benefits and the path to ownership is possible for buyers from any generation.
The number of Millennials looking to purchase a home and become homeowners is growing each year. Millennials represent the generation of people born between 1981 and 1997, meaning that a large portion of this generation is approaching the median home buying age of 31. Millennials also have the income needed to support a modest home payment, a fact that many Millennials may not be aware of.
So what opportunities are available for Millennials looking to travel the path to homeownership?
Down Payment Assistance
Believe it or not, the down payment – often cited as the most daunting obstacle to Millennial homeownership – isn’t as unattainable as you may have thought. While banks have cracked down credit scores for mortgage applicants since the housing crisis of the late 2000’s, there are still options for cash-strapped Millennials who are just starting out.
Some loan options allow for down payments from 0% to 6%, depending on lending institution and your personal credit history, and many will accept a down payment of 3% – that’s only $6,000 for a $200,000 home! Gone are the days when a 20% nest egg is a prerequisite to homeownership.
Even in the event that your preferred lending institution doesn’t offer a low down payment option, there are certain government grants and down payment assistance programs available to Millennials in certain states or geographic regions. Many Millennials are simply unaware of the down payment assistance possibilities that exist.
Owning a home is an expensive investment however, at tax time it helps to pay for itself. Interest paid on a mortgage is a tax writeoff that can help you save a little each year. Especially during those first few years when your mortgage checks pay more interest than principal, you can reap the reward of timely payment of your home expenses.
A Favorable Market
With low interest rates (at the time of writing) and plenty of homes on the market, the current home field is truly a buyer’s market. This works into your advantage as a first time Millennial home buyer, because you are more likely to find inexpensive homes that you can finance with lower interest rates than you might have, say, five years from now. The market tends to work in cycles, so striking while the iron is hot will help you to keep your monthly payments down throughout the term of your mortgage.
Many investors claim that real estate is always a good investment. And while platitudes of “always” and “never” may not be the best way to phrase financial advice, it’s still pretty solid wisdom. Land is a valuable asset that never loses value, since the demand for land increases as the population does.
Even if your first home isn’t much of a looker, and only has enough space for you and your honey – and maybe a baby or two – building your equity in a home, versus throwing your money into the black hole of renting, will give you a solid down payment on a future home to grow into. Or perhaps you want to turn your home into a future rental; depending on the market when you sell, this could prove to be a valuable income stream.
At the end of the day, when all of the financials and fine print are set aside, homeownership is worth it because the home is yours. You don’t have to ask a landlord (or worse, Mom and Dad) whether you can paint the walls or hang pictures. It’s your house! You can decorate it however you want, plan the landscaping and come and go as you please.
Yes, homeownership is hard work, and the path to purchasing your first home may be challenging however, the value of owning a home is priceless. If you’re ready to take that next step, contact the Tim Bullock Team to learn more about your options as a future millennial homeowner.