These are three truths that new homebuyers need to understand.

A recent survey showed that homebuyers aged 25 to 35 may feel unsure about the home-buying process and what they’re able to afford. Because of this uncertainty, many younger buyers are giving up on their home searches, or worse, they’ve decided that buying a home isn’t for them.

If you’re interested in buying a home or aren’t sure of where to begin, here are three concepts about homeownership you should understand before starting the process:

1. You don’t need a 20% down payment. For many potential homebuyers, saving for a down payment is one of the biggest obstacles, but that doesn’t have to be the case. According to a recent report from the National Association of Realtors, the median down payment for homes purchased between July 2019 and July 2020 was only 12%. That number was even lower when broken down by age groups; for buyers between 22 and 30, the median down payment was only 6%.

Our team works with several lenders who have access to special programs and grants and can offer down payment assistance, which often brings your down payment to a low of 3.5%—sometimes even 0%.

”It’s imperative that you speak with professionals who can track the real-life numbers to determine how much house you can afford.”

2. You may be able to afford more of a home than you think. Some buyers (especially young buyers) feel that they can’t afford a home that suits their needs and have decided to continue renting. That may be a mistake. When you rent instead of buying a home, you’re missing out on distinct long-term benefits. For example, when you rent, you’re paying the landlord’s mortgage instead of building your own wealth through home appreciation. Your monthly payment will increase as rental rates increase, whereas homeowners are able to lock in their monthly mortgage payments. If you’re currently paying $1,600 a month in rent, that could translate into you being able to afford about a $300,000 home in the Richmond area.

3. Homeownership will become less affordable the longer you wait to buy. Experts are forecasting that mortgage rates will continue to increase slightly over the next year and that home values will continue to rise due to appreciation. That means, for example, a home worth $300,000 will be worth approximately 6% more by next year. If you’re planning to take advantage of a 3.5% down payment, you'll have to come up with an additional $630. Mortgage rates are projected to creep up potentially by 0.5% over the next year, meaning you would pay an extra $80 to $100 per month in interest for the same house. Overall, you’d be looking at a total cost increase of $150 a month or more for the same home if you wait until next year to buy it.

In the end, it’s up to you and your personal circumstances to decide if now is the right time to buy a home. However, you need to speak with professionals who can track the real-life numbers to determine how much house you can afford, as well as whether or not it will cost you money to wait.

If you’d like to find out if now is the best time for you to become a homeowner, reach out to us for a no-pressure consultation. We’ll listen to your situation and work to find the best deal for you. Hope to hear from you soon!