2 Ways First-Time Buyers Can Get Into a Home Sooner
For a lot of first-time buyers, owning a home can feel perpetually a few years out of reach. Saving for a down payment takes time, and each year you spend renting can make owning feel further off.
But buying your first home doesn’t have to happen to feel like a far away goal. Two choices you control can bring your first home years closer, even with affordability as tight as it is right now.
Your First Home Could Be 7 Years Away, Not 15
Feel like your first home is years out of reach? With affordability this tight, we get it. But the type of home you buy can change the timeline in a big way. On the typical path, saving up and reaching the break-even point where owning costs about the same as renting takes around 15 years. With a starter home, it's closer to 7. And both of those numbers assume a 20 percent down payment. Most first-time buyers put down far less, and some loans require as little as 3 percent or even zero down. Tired of waiting? Reach out to The Kombrink Team at One Source Realty and let's chat about getting you into your first home sooner.
So many of our buyers feel their first home is years out of reach. With affordability this tight, I can see why.
But here's what we always tell them. There are a couple ways to speed up the process, starting with the type of home you buy. Opting for a starter home can get you there in about half the time.
On the typical path, saving up and getting to the break even point where owning costs the same as renting takes about fifteen years.
With a starter home, though, it’s only around 7. While that might sound obvious, buying an entry-level home can shave more time off the wait than you’d expect.
And, keep in mind that both those numbers assume you’re saving up for a twenty percent down payment. Most first-time buyers put down far less.
So, these numbers may be higher than they need to be. Especially when you consider some loans only require as little as three or even zero percent down.
So, if you’re tired of waiting, reach out to The Kombrink Team and let’s chat about what we can do to get you in your first home sooner. Rather than waiting for a few more years.
How Long Buying Really Takes
First, one quick definition. "Breaking even" is the point where owning has cost you about the same as renting would have over the same period. And after that point, owning starts to cost less than renting. Kara Ng, Senior Economist at Zillow, puts it this way:
"Buyers should think about not just when they can afford to buy, but how long they'd need to stay before owning makes more financial sense than renting."
So how long does reaching that point usually take? And what are the shortcuts? Let’s do the math.
According to Zillow, it usually takes about 8.5 years to save for a 20% down payment, then roughly 6.2 more years before owning costs the same as renting. Together, that's just under 15 years. But that math relies on two assumptions: that you're buying a mid-priced home, and that you're putting 20% down.
Change either one and your timeline gets shorter. Change both and it can shrink fast. It also varies widely by market, since local prices and rents are different depending on where you live.
A Starter Home Can Get You There Twice as Fast
A starter home usually means a home in the lower third of local prices. They’re often condos, townhomes, or single-family homes a little smaller or older than others in the area.
Choosing one over a mid-priced home can cut your wait down by a lot. And while that might sound obvious, you may not realize just how much it shortens your timeline. Because if you’re buying a more affordable home, you don’t have to save up as much or as long.
Zillow found that nationwide, a starter home takes half the time – about 7.2 years – to save for and come out ahead on, compared with renting (see graph below):
That works out to about 4.6 years to save and 2.6 years to break even. It won't erase every affordability challenge, but it can take years off the wait. And if you’ve already been saving for a while, it could get you closer to making it a reality.
You Usually Don't Need To Put 20% Down
You, like many first-time homebuyers, might assume you need a 20% down payment to even consider buying. But a lot of the time, you don’t.
Most first-time buyers don't put down anywhere near that. The National Association of Realtors shows the median down payment for first-time buyers is 10% (see graph below):
And the minimums go lower still. Some buyers put down as little as 3% on a conventional loan or 3.5% on an FHA loan, and eligible veterans or buyers in certain rural areas can put down nothing at all.
There's help with the upfront costs of buying, too. Down Payment Resource counts 2,746 assistance programs nationwide, and some are even stackable:
"Some homebuyers can layer multiple sources of assistance to reduce their upfront costs. Layering means combining more than one eligible source of funding as part of your home purchase."
Put those together – a lower price point, a smaller down payment, and help covering it – and the years you thought you needed start to come down.
Bottom Line
Your first home may not be as far off as it feels. When the numbers make sense for you, buying a starter home and putting down less than 20% can get you there years sooner.
Want to see which starter homes in our area could fit your budget? Let's connect.
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