In the 20th century, the American Dream included: going to college, getting a well-paying job, and buying a house. By doing this, people were on the right track to retiring. With real estate becoming more expensive every day, this task now seems like more of a nightmare than a dream for some people. Needing to put thousands of dollars down and putting yourself in hundreds of thousands of dollars in debt seems like a poor financial decision to most people. However, this is not “bad debt” as long as you can afford your monthly payment. Many wealthy people define “bad debt” as credit card or consumer debt, and “good debt” as a platform used to grow wealth including: business and real estate debt. Buying a house has many more pros than renting, including: building equity in your property, taking advantage of real estate appreciation, tax deductions, and the freedom to control where you live. For example, When you rent, you may not have to deal with maintenance that may occur while living there, but the money you are paying in rent each month, you will never see again. When you own your house, the money you are paying each month will be recovered when you decide to sell your house. Yes, maintenance is the responsibility of the owner, but when you go to sell the property, and you can add “new furnace, roof, water heater, kitchen, bathrooms, etc.” for marketing purposes, and expect more money in your pocket once sold. Lastly, renting has no tax advantages. Owning real estate allows tax deductions for your personal residence, and even more tax deductions if you own investment properties.
Some common reasons you may think you cannot buy a house:
I need a large amount of money for a down payment. There are many ways around this, including: putting anywhere from 0% down with a down payment assistance program to as little as 3.5%. (If you are a veteran of the United States Military you can put 0% down!) All you need to do is talk with a lender to learn more about the loan programs that do not require a 20% down payment.
My credit is too low to get approved for a loan. There are many ways to improve your credit score. It can be as easy as making payments on time, or paying off a credit card that you may not use as often. I highly recommend talking with a lender about this if you have questions because they often help clients improve their credit scores. There are also credit repair services where companies help consumers create a plan to repair credit scores.
Home prices are too expensive where I live. Real estate prices continue to rise because of the simple fact that the world has a limited amount of land to build houses on. History shows the real estate market will “slow down,” but if you continue to wait until then, you may not ever take the leap into owning a home. The co-host David Green from The Bigger Pockets Podcast says “It is better to get in the game, then wait, instead of waiting to get in the game.” Buying real estate now and waiting 10-30 years for your house to appreciate in value is better than waiting for home prices to come down because as I mentioned above, there is no more land to be had. In conclusion, home prices may come down, but it is very hard to predict, and prices will continue to increase after they have “rebounded.”
Trent J. Werner
Oregon Real Estate Broker