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Millenial Homebuying: Why to Not Fear Leaving the Lease in Your 20s.

With most of your life still ahead of you, your 20s can be a great time to start reaping the benefits of home ownership. Although it’s an intimidating move, making the switch from renting to owning just a few years earlier than planned can save you thousands in disappearing rent checks. That’s probably why an increasing number of Millennials have been taking the home purchase plunge. A survey by the National Association of Realtors found that Millennials made up the largest group of recent homebuyers for the third year straight, making 35% of new home purchases in 2016. Let’s walk through five common fears of homebuying, and why (or how) to get around them.

 

 

  1. It’s too expensive. 

Despite the large price tag that accompanies a home purchase, when you break the costs down monthly, renting is actually more expensive than owning. At least, that’s the case in 42 states — and that’s after factoring in annual expenses, such as taxes. You’ll be able to build up your savings more quickly with the money you’re saving on every payment, plus the equity you’re building in your home acts like another forced savings account. But the value will be there when you need it, either when you sell your house or if you need to borrow against it.

 

  1. I can’t afford the down payment.

Traditionally, down payments are 20% of the home’s value — which can add up quickly. Millennials largely blame student debt for their slender savings accounts that might cover a $30,000 down payment on a modest $150,000 home. But fortunately, there are programs in place to assist first-time buyers secure their first loan with a much smaller down payment. The Federal Housing Administration offers loans with extremely low down payments, as low as 3.5%, in addition to providing resources to help you find local programs. Even some mainstream banks, such as Wells Fargo and Bank of America, have lowered their down payment requirements to cater to first-time buyers.

 

  1. There’s no real benefit.

Aside from the paperwork, renting and owning are about the same, right? Not even close. Homeowners enjoy the benefit of building equity, aka ownership interest, in their home, which has a real monetary value. Additionally, owners get more square footage for their monthly payment. According to the U.S. Census Bureau’s American Housing Survey, the median size of an owner-occupied space is nearly twice that of a rented space: 1,800 square feet, compared with 975 square feet.

 

  1. It’s only for families or couples. 

It’s true that the majority of home purchases are made by married couples — 66%, according to the NAR — single people are making their mark, too. In the NAR’s 2016 survey of home buyers, 17% of home purchases were made by single women, and 7% were made by single men. It’s a doable and increasingly common trend, especially for women, who continue to widen their margin over single male homeowners.

 

  1. I won’t be able to move.

Although it might feel like it, buying a home isn’t akin to marrying your current city. A home can still be a wise investment even if you plan to only spend another three years or so in that city. Similarly, if you can’t afford your dream home quite yet, purchasing a smaller starter home can help you accelerate your savings and leverage your equity toward your goal. If you’re expecting the home to appreciate in value while you’re living there, plan to live in the home for at least two years to avoid a capital gains tax, and also be mindful of your timing with consideration to the transaction fees — you don’t want to have to swallow closing costs on two homes back to back.

 

The choice to buy your first home is not a decision to be taken lightly, but if you’ve taken a close look at your budget and you can afford the down payment, it can be a large step in the direction of a sound financial future. Contact Mackenzie Blair Laine at Circa Real Estate to go over your options today.

 

This article was provided by Sam Radbil, a contributing member of the marketing and communications team at ABODO. ABODO Houston apartments was founded in 2013 and is headquartered in Madison, Wisconsin.

 


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