- “The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
- The top reason millennials choose to buy is to have control over their living space, at 93%.
- Many millennials who rent a home or apartment prior to buying their own homes dream of the day that they will be able to paint the walls whatever color they’d like, or renovate an outdated part of their living space.
Millionaire to Millennials: Buy Now!
Self-made millionaire David Bach was quoted in a CNBC article explaining that “the single biggest mistake millennials are making” is not purchasing a home because buying real estate is “an escalator to wealth.” Bach went on to explain:
“If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.” Buyhome
In his bestselling book, “The Automatic Millionaire,” Bach does the math:
“As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!”
Who is David Bach? Read more below…
Psst: Millennials, come on out – it’s time to buy a home
Quick! What’s the number one reason that so many millennials aren’t getting into the housing market? No-brainer, right? It’s all about that stubborn student loan debt they racked up. Buyhome
In fact, a recent study by the Federal Reserve claims that the 12 million millennials in their 30s with student loan debt, owe more than those in their 20s. The average student loan balance for the former sits at slightly more than $34,000 and most of you are, or were, grad students, according to U.S. News and World Report.
Your debt and your income and why they matter
The most common reason a borrower is turned down for a mortgage is because he or she has what is known as an unacceptable “debt-to-income” (DTI) ratio. And, millennials are the largest group of would-be homebuyers who walk away from a pre-approval session with a big, fat, rejection. Buyhome
Lenders naturally want to know that lending you the money to buy a home doesn’t expose them to risk. While there are many types of tests and statistics to help them figure this out, the DTI is the granddaddy of them all. Buyhome
After you drop off your tax returns, pay stubs, bank statements and all the other documents the underwriter wants to see, he or she will determine your DTI two ways, a so-called front-end and a back-end DTI. Buyhome
The latter involves dividing the amount you pay for total recurring debt every month by your gross monthly income. To get a mortgage in the past, this figure would typically need to be no higher than 36 percent. We say “typically” because Fannie Mae would consider a DTI of 45 percent under certain circumstances (high credit scores and reserves, for instance). Buyhome