Almost 66% of Americans own a home. According to the U.S. Census Bureau, about 75% of Americans between 55 and 64 years are homeowners. Among people aged 65 and more, the proportion of households occupied by owners is over 79%.
While new buyers mostly come from younger generations, buying a home later in life is becoming more common because people retire later. According to Gallup, longer life spans and changes in Social Security payouts may have contributed to the increase in the average retirement age to 61, up from 57 in 1991. This trend is expected to continue.
If you are considering homeownership, this post will help you evaluate the pros and cons of buying a house. Explore factors like equity-building and maintenance responsibilities to decide whether buying a house aligns with your goals.
For many people, homeownership remains the cornerstone of the American dream. Pride, security, and a sense of accomplishment are the feelings that often accompany having a home that’s truly yours.
There are many practical benefits to acquiring a property of your own. However, there are also some potential pitfalls of owning a house. Here’s a brief overview of the pros and cons of buying a house.
Before deciding, carefully weigh the pros and cons of buying a house. While you can allow emotional pull to play a role, primarily rely on cold facts and figures.
A home purchase is one of the most sizable investments you’re likely to make. The median home price currently stands at about $416,000. (Unlike averages, median values do not include the extremes at either end.)
Most home buyers finance their purchase through a loan, but you still need ready cash for a down payment (between 3% and 20% of the purchase price) and closing fees (an additional 2% to 5% of the purchase price).
Factor in other costs associated with buying a house, such as the fees for an estate agent, a home inspector, or an estate lawyer. Don’t forget the expenses related to home ownership, such as maintenance, repairs, insurance, mortgage payment, and property taxes. When calculating how much money you need to buy a house, it’s crucial to consider how much it will cost you each month, not just on closing day.
Pay particular attention to your mortgage rate. Be sure to contact multiple lenders and shop around for the best deal. Even a tiny difference in the mortgage rate can translate into thousands of dollars. Currently, the 30-year fixed-rate mortgage averages at over 7%.
A few people can afford to buy a house outright unless they sell the property they own. Typically, buying a house involves getting a loan.
To be eligible for a home loan, you must fulfill certain conditions. One of the most important is a good credit score.
National credit bureaus maintain credit scores. They look at your total debt (credit cards, auto loans, student loans, and so on) and your debt repayment history. A credit score based on these factors allows lenders to evaluate how likely you are to pay your mortgage.
Your credit score (or FICO Score) can range from 300 to 850. Generally speaking, you need at least a 620 FICO Score to qualify for a conventional home loan. A higher credit score may qualify you for lower mortgage interest rates and better loan terms. Some types of home loans, for example, government-backed VA loans, do not require you to meet a minimum credit score.
Your lender will also examine other factors, such as your income, total assets, debt-to-income ratio, and employment history.
By law, lenders may not reject a loan application based on age. Still, they are less likely to approve a mortgage for older applicants. Your bank or other money-lending institution may not be happy about the length of time you are likely to continue receiving your present income or about the source of your earnings (for example, investment income is considered riskier than earned income).
On the other hand, some criteria may favor you because people in their 50s usually have an extensive history of successfully handling credit.
The approved home loans for applicants over 50 usually have a slightly higher interest rate. You may want to opt for a shorter-term loan, even though it entails higher monthly payments. If possible, plan to repay the loan while still working so that you won’t need to put off retiring due to the mortgage burden.
Finding an affordable place to live is crucial for many people. Home prices range widely across the U.S. markets in one part of the country may be cooling off and heating up elsewhere. Although home prices have increased significantly in some areas, there are many regions where housing remains relatively inexpensive.
According to the Zillow Home Value Index, West Virginia, with a home value index of $155,148, is the most affordable state to buy a house in the U.S. Mississippi is second with $176,655, and Oklahoma is third with $198,995. Other states on their list are Arkansans, Louisiana, Kentucky, Iowa, Kansas, Ohio, and Alabama.
The lists of places with low-cost houses vary from source to source, depending on the period under observation and the methodology used. In any case, choosing where to move in your 50s or after retirement can’t be based only on housing affordability. Other factors are at play, such as closeness of family, general cost of living, taxes, availability of amenities and facilities, and job opportunities (if you plan to continue generating an income).
The best time to buy a house depends on whether you are looking for the cheapest deals or the most comprehensive selection.
Buyers typically get the best prices in the autumn and winter. But that is also when the supply is at its lowest, so there is not much choice. You may be better off timing your purchase in August or September when prices often fall but the inventory is still high.
However, nobody can accurately predict real estate trends. Your situation will determine the best time for you to buy a house. You are good to go when your debt is under control, your credit score is good, and you can afford a down payment and other costs of homeownership.
On average, the process of buying a house takes about six months. The journey involves the following steps:
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