Buying a home is a critical financial decision for people who have always been rented. However, it can create anxiety because the entire buying process seems like a daunting task. Millennial renters are desperate to own their own homes, but the majority are worried about the costs of homeownership. In 2017, loanDepot conducted a survey and found that millennials who rent a home are 52% more likely to wish to purchase one for themselves. However, half of them are worried about the high cost of investment. Only 18% are confident they can afford it.
Being a first home buyer, you can enjoy some notable advantages of entering the real estate market. There are various stages and requirements of the home buying process to ensure you get the most out of your purchase. The following are the real estate facts and things a first home buyer must know to ease this complicated procedure and make the big purchase less stressful.
Real Estate Facts For First Home Buyers
Deciding on buying your very first home can appear to be challenging. However, people enjoy many perks when they buy their first home. If you are someone who is living under the rock and knows nothing about the real estate market, the facts listed below should be sufficient to make you familiarize yourself with the real estate industry.
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Buying A Home Is The Best Investment Ever
Whether you are a real estate investor or a first-time homebuyer, your home is the safest investment for your retirement. Over time, the market value of your home will appreciate. Your property can help increase your retirement reserve by the time you get to retire. By investing in a house, you choose to live in your home without any rent burden. As the real estate market tends to rise, you would be able to own a great property over time.
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Reduced Interest And Taxes That Will Benefit The First Home Buyer
Another real estate fact for the first-time homebuyer is reduced interest and tax deduction. The government assists homeowners by sharing their financial burden. Homeowners are encouraged to own their homes through tax deductions. Offsetting taxes, interest deductions, and paying low property taxes can be some of the benefits. These deductions can drive better yearly savings, and you can enjoy profitable tax returns.
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A Valuable Asset That Appreciates In Value
Owning an asset in a market that continues to grow is another fact you should know when buying a home. In the later stage, you can sell your property or rent it out to establish another stream of income. The amount you’re paying to own a home is more than a bill. It’s your future investment. In most markets, your property can appreciate at an average rate of 5%. As a result, you can expect a sharp increase in your asset’s market value.
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Homebuyers Are Mostly The Millennials
A crazy real estate fact is that baby boomers and Gen Xers have been dominated by millennials concerning homeownership. Millennials in the US are more likely to dream of purchasing their own homes. People might think millennials are busy enjoying their avocado toasts, so they’re not buying homes. But the other side of the picture is that they are overburdened with their student loans. The low level of their income can be another factor that might intervene in their dream of owning a home.
Approximately 1000 Americans were polled in a survey, and 51% were millennials who wanted to buy their first home. They are more likely to acquire large mortgages as they are intensely driven to purchase a home with large yards.
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Housing Industry Will Keep On Rising
The growth of the housing industry is one of the most significant factors. Despite some dips in previous years, the US housing market for 2020 predicts a sustainable upward trend. Indicators of market growth are rising. Some of them include a low unemployment rate, fairly low taxes, less consumption of interest-only mortgages, and increased millennials’ investment in the housing industry.
Pricing And Investment Facts About Real Estate
Knowing the real estate facts leads the first-time home buyer in the right direction when buying a home in the United States. You can predict the local market movements by analyzing facts and statistics. Before making a big purchase, you should examine the property features, neighborhoods, and surroundings. The growing interest of millennials and the burden of student loans are factors driving growth in the US real estate industry.
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Pricing Facts In The Us Rental Market
Over the last 40 years, the percentage of entry-level homes that are under 1,400 square feet has consistently declined. In contrast, the construction of smaller starter homes decreased by 7% in 2020. It is predicted that home prices will rise by more than 7.0% in any of the top ten housing markets in 2022, including Providence, Salt Lake City, and Boise.
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Investment Facts In The Us Rental Market
The real estate investment facts in the US market are going off the deep end. Since 2016, a 50.7% increase has been observed in US home values. Renter-occupied homes make up more than 50 million homes in the US, while owner-occupied properties account for 75 million. This year, 45 million millennials will be nearing the prime home buying age. However, they will face stiff competition from other buyers and investors as well.
Three Questions To Consider When Buying A Home
Buying a home for the first time gives first-time buyers the independence of being their own landlord and owning equity. Undoubtedly, purchasing a home is a wise investment but you need to identify your long-term goals. It is imperative to ensure your homeownership aligns with your long-term goals. Following are a few questions that will push you towards making the right deal.
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Are You In A Good Financial Position?
Navigating the online property listings to find the home of your dream will definitely catch your eyes. Despite these factors, the listed prices of your dream home can leave you stunned. Before searching for houses, perform a financial analysis. Review your funds, look at your savings, check your debt, and analyze your spending to determine if you are in a position to bear the ongoing expenses.
Be ready to pay some upfront charges and emergency funds that the lender might demand. Another real estate fact is that you’ll require a positive credit history and a Debt to income ratio of 43%, to meet all requirements for a home loan.
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How Can You Choose The Most Appropriate Home For Your Needs?
When buying a home for the first time, you can have multiple options to choose from. Every residential property option has its advantages and disadvantages. You need to critically think about which type of home would most suit your needs. You have various choices like a single-family home, a condo, a duplex, or a multi-family home. Based on your long-term goals, you should determine which type of home can better meet your homeownership goals.
If you wish to save money on your home purchase costs, you can choose a fixer-upper because they are available at lower prices. However, you still need to be alert as a fixer-upper home requires major maintenance work that can eat a lot of your money. It may cost you a lot more to transform a fixer-upper into your ideal home based on time, and money spent.
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Does Your Income Qualify You For A Mortgage?
Before you make your big purchase decisions, you must have an idea of how much mortgage you can raise from a lender. The lenders analyze multiple factors including your monthly income or total earnings, amount of debt, and your employment history before approving your home loan. A $450,000 home might seem accessible for you, but the money lenders may believe you can only afford a $300,000 house.
Realtors will not work with you if you are unsure about the amount you will spend to purchase your home. You must complete all the required paperwork to apply for a pre-mortgage approval before shopping for a home. If there is no pre-approval from a lender, a seller will not even consider your offer.
The Bottom Line
Buying a home in the US can be a difficult task. However, the facts listed above must fill all the gaps that you might have in your real estate and home buying knowledge. You should understand the nuances of the US housing market before jumping into it. If you have strong credit standing, a substantial amount of savings, and a stable source of income, you are successful in the early stages of making a big purchase. Educating yourself about the market will leave you less stressed at the time of home buying. In addition, you will get the house you need at a cost you can bear.