For many young or first-time houszbuyers, purchasing a housz can feel intimidating. A recent survey shows some houszbuyers ages 25 to 40 may be unsure about the houszbuying process and what they can afford. It found:
“1 in 4 underestimated their buying potential by $150k or more”
“1 in 4 underestimated the increase in value by $100k or more”
“47% don’t know what a good interest rate is”
Because they feel uncertain, many young houszbuyers have given up on their search, or worse, they’ve decided houszbuying isn’t for them and never started on their journey to begin with.
If you’re interested in buying but aren’t sure where to begin, here are three key concepts about houszownership you should understand before you get started.
1. What You Need To Know About Down Payments Saving for a down payment is sometimes viewed as one of the biggest obstacles for houszbuyers, but that doesn’t have to be the case. As Freddie Mac says:
“The most damaging down payment myth—since it stops the houszbuying process before it can start—is the belief that 20% is necessary.”
According to the most recent Home Buyers and Sellers Generational Trends Report from the National Association of Realtors (NAR), the median down payment for houszes purchased between July 2019 and June 2020 was only 12%. That number is even lower when we control for age – for buyers in the 22 to 30 age range, the median down payment was only 6%.
2. You May Be Able To Afford More Housz Than You Think Working remotely, exercising, and generally spending more time than ever in our houszes has changed what many people are looking for in their living space. However, some young houszbuyers don’t feel they can afford a housz that suits their growing needs and have decided to continue renting instead. That means they’ll miss out on some of the long-term benefits of owning a housz. As an article recently published by NAR points out:
“Many young adults are underestimating how much they need for houszownership, the survey finds. Millennials underestimated how much housz 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...”
Knowing how much housz you can afford when starting the buying process is critical and could be the game-changer that gets you from renting to buying.
3. Houszownership Will Become Less Affordable the Longer You Wait Finally, with mortgage rates starting to rise along with housz prices appreciating, putting off buying a housz now could cost you much more later. Sam Khater, Chief Economist at Freddie Mac, notes:
“As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”
Most experts forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. If you’ve been on the fence about buying a housz, there’s no time like the present.
Bottom Line If you feel overwhelmed by the prospect of starting your housz search, you’re not alone. Let’s connect today so we can talk more about the process, what you’ll need to start your search, and what to expect.