Metro Columbus home pricesRising rental costs are making it more difficult for first-time home buyers to save money for a down payment, according to recent articles published by CNBC and Zillow. In many areas of the country, renters are challenged by housing costs that are rising faster than the pace of wages, forcing would-be buyers to choose between their savings goals.

For example, a survey of renters revealed that they were saving for multiple priorities, which bumped saving for a home purchase further down the list. Here’s how savings priorities stacked up:

  • 59% of renters are saving for an emergency fund
  • 51% are saving for retirement
  • 50% are saving for a child’s education
  • 39% are saving for a down payment on a home

The renter survey, published by Freddie Mac, shows that 55% of potential buyers have put off their home purchase plans. The reasons given include lack of an adequate down payment, limited affordable home inventory, and insufficient credit scores.

What the survey doesn’t tell us, is what these renters truly know about mortgages and the home buying process. Down payment requirements have eased in the past year, with Freddie Mac and Fannie Mae offering programs with just 3% down. Loans backed by the Federal Housing Administration require only 3.5% down. Eligible veterans and military personnel can access VA-backed mortgages with zero down payment. Credit score requirements have also softened a bit.

Renters should also consider how home ownership can help them achieve better financial stability. For example, a fixed-rate mortgage means that the principal and interest portion of your mortgage payment (P&I) never changes. But on the national average, rents have gone up by 5% this past year alone. When you consider the cumulative effective of annual rent increases, it’s easy to understand why some renters struggle.

Owning a home may also give you the opportunity to itemize your income tax return. Expenses like points (prepaid interest), mortgage interest, and property taxes are typical deductions. Home ownership can open the door to itemized tax return filing, enabling taxpayers to take advantage of additional deductions. Please see a professional tax preparer for details, and visit the credits and deductions page of IRS.gov.

Renters who wish to become homeowners can begin by organizing a monthly budget. While it may not sound like much fun, taking control of your finances is one of the most self-empowering things you can do. Controlling your spending and prioritizing savings will help you establish good financial habits, and put you on the path to successful home ownership.

As your Exclusive Buyer’s Broker, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times.

Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!

Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!

Andrew Show
Broker, CEBA, CEBA-M, CNE, CSP, ABR-M, e-PRO, GREEN
Buyer’s Resource Realty Services
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax