Homeownership is a huge milestone in adult life. It can also be a financially overwhelming prospect for those considering it. Luckily, there are some potential options for helping with your down payment, and there are plenty of benefits to purchasing instead of renting.
Benefits of Buying As Early As Possible
Purchasing a home may feel daunting at first, especially if you have a history of renting, but there are plenty of reasons to consider it. Firstly, if you know you will be living in a certain area for at least three to five years, buying a home should be on your radar. Here’s why:
- The home is completely yours. You have free reign to do with it what you please. (Yes, even if that includes painting the walls your favorite shade of green.)
- You can sell when you’re ready. Without a binding contract or lease, you don’t have to worry about a specific timeline. Sell when you feel ready.
- Stop paying rent. While you’ll continue to pay monthly costs with your home, the money you’re spending through ownership is much more of an investment than renting.
Ultimately, homeownership gets easier over time. Generally, the biggest deterring factor is the initial down payment. After all, according to U.S. News, 61.7% of millennials say they cannot afford it. But what if we told you there’s hope for that?
Potential Down Payment Help For Buying
With the creation of down payment assistance programs, those who once thought they weren’t adequately prepared for homeownership now have the help they need, and can more fully transition from renters to homeowners. Down payment assistance programs take three forms:
- Down payment grants. This generally involves providing grants for closing cost funds so they do not have to be repaid.
- Forgivable second mortgage programs. Traditional second mortgage programs generally charge interest, but with forgivable second mortgage programs, there is a possibility for a zero percent interest loan when certain requirements are met.
- Matched savings program. Open a new bank account dedicated to saving for your down payment. A designated entity will make a contribution that matches yours.
While you must be qualified in order to receive any of the above, it’s certainly worth looking into. Eligibility is generally determined by income and where you live.
Start Small, Grow Over Time
Buying your first home can be exciting and is often a memorable experience. But it’s also important to weigh the costs and not overextend yourself on your first home purchase. Buying a smaller home is advantageous for a few reasons:
- With a smaller home, less can go wrong. You can find comfort in knowing that with less square footage, you’ll likely be spending less in maintenance costs.
- Smaller monthly payments. If you’re accustomed to a monthly rent amount, see if you can get a lender to secure a similar number for your mortgage payment so you’re not suddenly overwhelmed by higher costs.
- Home value declines. As a general rule of thumb, homes increase in value by 3-5% per year, but they can always decline in value as well. So while there is potential risk involved, starting small is one way to err on the side of caution while still reaping the benefits of home ownership.
Consider your plans for the future, your budget, and your current lifestyle. This should tell you what you need to know about your being ready to buy a home. If you feel prepared to take the next step, know there is very realistic hope for you financially. And get excited, because this is one of the best and smartest decisions you can make for your future.