It's often documented how millenials are not buying homes. I think some millennials are apprehensive to homeownership because they don't understand the process. These are three topics some millennials , first-time homebuyers are confused by.
I don’t have 20%...
You can put less than 20% down and still qualify for a conventional mortgage. I’ve met countless first time homebuyers who thought they needed 20% or more as a down payment.
If you put less than 20% down, the mortgage lender will require you to get mortgage insurance.
I recently helped a client purchase his first home. His mortgage insurance payment with a down payment of 10% is less than $60/month. Even though mortgage insurance is an added expense, paying $60/month allowed my client the option of liquidating 10% of his cash versus putting down 20%.
I’ll wait until the market cools off...
We live on an island. There’s only so much buildable land. If supply is low, won’t prices increase?
Go to HiCentral.com. The Honolulu Board of Realtors has historical housing data for the island of Oahu. In 1985, the median sales price for a single family home was $158,600. In 2017, the median sales price for a single family home was $755,000.
I don’t want to spend all my money...
Money makes some people feel secure. I think most financial advisors will agree that one should have an emergency fund.
However, when you a buy a home, you’re also purchasing an asset. Homes, unlike a car, will appreciate over time. Owning a home is very unique. You can live in it, it’s tangible, and you can borrow against it. When you purchase a home, your mortgage payments are fixed. Will other prices increase, like gas, milk, or even an airline ticket, your mortgage payments will stay the same for 30 years (unless you re-finance). To some extent, owning a home is a hedge against inflation.
-RO