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If you’re a first-time homebuyer, the current economy could be putting a damper on your homeownership dreams. With rising home prices and inflation upping the cost of life’s basic expenses, is now really the time to dive into your first mortgage? And if you wait, could you be priced out of the market completely?
The good news is that, according to experts, first-time buyers still enjoy several advantages in the current housing market if they choose to buy.
While taking on a mortgage might not make sense for all buyers right now, here’s how to better understand what’s going on in the housing market, and tips to make the most of your home search—despite the inflationary market.
The Case for Buying a Home Now
Looking at real estate listings can be entertaining. From the comfort of your couch, you can scroll through photos of perfect homes in beautiful neighborhoods and imagine how it’ll feel to unload your groceries into that brand new stainless side-by-side fridge.
But then there’s the downside of looking at those listings. Your favorite homes probably fly off the market in hours, if not days. Homes are selling for over listing price—sometimes hundreds of thousands of dollars more. And the groceries you want to stuff in that fridge cost more each week thanks to inflation.
But Mark Zipperer, managing broker and founder of The Zip Group in Chicago, says there’s often one thing his buyers don’t think about in today’s fast-paced housing market.
“When a first-time buyer tells me that they’re not sure about buying in this market, I always ask, ‘Is your rent going down?’” says Zipperer. “A predictable mortgage payment each month not only helps you hedge against rising prices elsewhere in the economy. Homeowners typically have a net worth that’s 40 times greater than renters. Buying, even if you have to start small, is a path to building wealth.”
But how exactly does spending money to get into your first home help you build wealth?
- Building equity vs. paying rent. Each time you make a mortgage payment, you essentially build a bit of equity in your home, as long as there isn’t a housing crash. Each month you pay rent, you’re only building your landlord’s equity.
- Mortgage interest deduction. Homeownership makes you eligible to deduct your mortgage interest and property taxes on your federal taxes each year, which can reduce your tax liability and free-up …….