If you are currently renting, you could get caught in the continuous cycle of increased rents, without realizing the long-term impact on your future ability to save for a down payment. Purchasing a for-sale home still remains highly affordable for buyers who are able to save for a down payment and capitalize on low mortgage interest rates. Unfortunately, for current renters, as monthly rents continue to rise , along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult for them.
Zillow Press Release Synopsis
The affordability of the nation’s rental inventory is currently much worse than the affordability of the home sale inventory. Nationally, renters who signed lease agreements at the end of June (beginning of July) will pay 29.5% of their income towards rent. In comparison, U.S. home buyers at the end of June (second quarter) could actually expect to pay 14.3% less of their total income towards their mortgage.
What are the options?
While you may already have enough saved for the purchase of your first home; many Millennials are skeptical about their ability to own a home. Housingwire recently reported: “It’s not that Millennials and other potential buyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. It’s that they think they are not qualified or they think they don’t have a big enough down payment.”
There are many factors as to why one would be apprehensive about applying for a mortgage, whether it’s due to student debt or other financial limitations. The reality is, applying for a mortgage, no matter how great the credit score is, is uncomfortable for some people. With all the chatter making its way out of the trade space, the average buyer may be left misinformed about their own financial capability. The good news…. the credit box has actually expanded and the credit requirements are not as bad as one would think. Housingwire reported, 1 in 5 borrowers who took out conforming, conventional mortgages put down 10% or less this year.
The biggest problem is that many potential buyers are sidelining themselves. They do not want the embarrassment of a rejection, so they either stick with their apartment or remain in a house they have outgrown.
Don’t lose sight of your future and get caught in this renters’ trap. If you believe you are ready to purchase a home, be proactive and find out if you are financially ready and when the time is right move forward…..don’t sideline your own dreams!