More millennials are buying homes today, and there is good reason to do so. Interest rates are low, it's easier to get a loan, and property values are rising.
If you are a millennial and thinking about buying a home, you are far from alone! Here are some of the best reasons that millennials are buying homes these days:
One of the strongest arguments for a millennial to buy a home is that they can from a young age, stop paying for someone else's mortgage and pay their own. After years of paying your own mortgage, you will eventually own the home. The way home prices are these days, it also can be a better idea to buy than to rent anyway. In many areas, you can actually save money each month by buying a home.
One problem with renting a house is that the landlord or property owner controls the asset. If they decide that they want to sell it and you are not ready to buy it or you don't want to buy it, you will have to move. This type of insecurity in your housing situation is stressful after a few years. Also, when you rent, you always face having the rent increased each year, so it can be hard to make financial plans in the long term. When you buy a home, you know exactly what your mortgage payment is going to be year after year. And as property values go up and interest rates rise, your payment is usually locked in for 15 or 30 years, if you opted for a fixed mortgage. As you get older, you will value this type of financial security a great deal.
The price of homes is rising nicely in the US, with 4-5% per year pretty typical these day. Also, we know that for the most part over the long term, most property values will increase. As you continue to pay down your mortgage and the value of the property goes up, you will increase your equity. You can eventually pull that money out of the property if you like and use it to buy another one and rent it out, if you like. Or you can use the money and put it into another type of investment.
There was a time in America where families were paying 15% interest for a mortgage. Fortunately, those days are far behind us. As of late 2016, you can get a mortgage for 30 years at as low as 3.5%! You will rarely if ever see interest rates that low on anything in your life – ever. When you can get a mortgage at that low of an interest rate, you can save hundreds or thousands of dollars per year in interest. This allows you to use that money for investing in other things that increase your net worth.
One of the best parts of owning a home is that it usually will build equity as your mortgage payments pay off principle and the price of the home goes up. This allows you to eventually get a home equity loan or home equity line of credit (HELOC) so that you can use that money for something that you really need. Some people decide to use the money to pay for a college education, or to renovate their home. The latter makes a lot of sense in many cases as this adds to the home's value, and then you can make more money when you sell it.
Owning your home means that you are free to do with it what you want. You do not have to worry about changing something in the home and then having to change it back when you move out. Being able to decorate or alter the home as you wish is a major benefit of home ownership. See the Infographic Explaining How Millennials Are Becoming First Time Home Buyers.
2009 and 2010 are far behind us. Those were the years when the credit markets were much tighter and it was very difficult to get a home loan. Despite what some say, you do not have to have a high credit score to buy a home. If you have at least a 620 to 640 FICO, you should be able to buy a home if you have the income to support your application. You may even be able to get a home loan with a 600 credit score, although you will need to put more money down.
While it is ideal if you put down 20% of the purchase price, it is rarely required. There are home loans available for millennials that require only 3.5% or 5% down! This amounts to less than $10,000 in many cases, which most people can save in a year or so if they really try. Down payment requirements are quite a bit easier than they used to be. So, really, what is the argument for renting a home? If you can buy a house with only $8000 or $10,000 down, that is within the means of most people who exercise financial discipline.
There are times when renting a home makes sense; if you are going to be moving in a year to another area, or if you just moved to a city and want to get to know the community before buying….these are good reasons to rent for the time being. But if you want to build your wealth over time, millennials really should consider buying a home as of 2016. Prices are reasonable, credit requirements are quite reasonable too, and interest rates are very low. When you run the numbers between renting and buying, in many cases, buying makes a lot of sense.
First Time Home Financing.com does not offer mortgages or direct financing. FTHF.com is a website that offers information about house financing and does not promise that all applicants will be approved for the new FHA loan program with lower mortgage insurance. This website and its affiliates have no affiliation with the FHA or any other government agency. This website offers information about lending services by publishing editorial content related to the U.S. finance sector.
Copyright © 2000-2016 and Beyond - All rights reserved. FirstTimeHomeFinancing.com