How do homes build generational wealth?
Homeownership is a large part of the American dream. While homes serve as your dwelling and shelter, the place you call home could metaphorically become a financial safety net for your family. Whether you’re single and just starting out, looking to start a family or already have a family of your own, homeownership is a credible way that you can pass down wealth to future generations.
Why is homeownership an investment in future generations while renting isn’t? Renting is a good option for small periods of time, like when you’ve recently moved or when you’re job placement is temporary. But your rent payments are like daily transactions and don’t go toward an investment in your future – they go into someone else’s pocket. When you make a mortgage payment, you’re repaying a debt that eventually benefits you and your family. Paying a mortgage feels no different than paying rent, but the result is vastly different!
As you continue to make payments toward your mortgage, you’re building equity, or increasing the portion of the home you own. If you sell your house in the future for $70,000, and you owe the bank $15,000 because of equity you’ve earned by making mortgage payments, you’ll pocket $55,000 that you can then invest in your family’s future. You’re reaping the benefits of paying on your mortgage for years.
Ultimately, homeownership is a way to save money by investing in a home that meets your current needs in a way that renting does not. So, what steps should you take to buy a house and officially become a homeowner?
The first step is to understand your options. It’s important to know which factors, like income, credit rating, current monthly expenses, down payment and interest rates, affect the affordability of a home. These terms may seem intimidating, but THDA offers several resources like pre- and post-purchase homebuyer education and homebuyer education counselors to help define these terms and explain how they fit in the process.
Using these resources not only can help you learn what you can afford but it’s also a way to know your rights as a homeowner. By educating yourself, you lower your chance of overcommitting financially or becoming a victim to risks like predatory lending. Don’t worry, we understand that the process of buying a house isn’t any less scary or unknown.
Once you understand your options and your rights, think about signing up for a local homebuyer education course, like those offered by United Housing. These courses explain the foundation of homeownership like the importance of credit, how to build your credit, how to qualify for a mortgage loan, choosing a house, working with a realtor and basic home maintenance (plus much more!).
A home is a place for families – current and future. You can build a solid foundation for your family, one that will exist today and in the future. Ready to become a homeowner? Sign up for one of our homebuyer education classes or call us at 901-272-1122.
