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Too Young to Own a Home
written by Mike Ballew August 14, 2022
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How young is too young to own a home? You can legally buy a home when you are 18, but for most of us more years need to pass before we’re ready to become homeowners.

The Real Estate Tollway

Real estate is one of those things that gets you coming and going. You have to pay a toll to hop on the homeowner highway, and you have to pay to get off. 

When buying a home, you are faced with numerous fees such as an appraisal, survey, loan origination fee, title insurance, and recording fee to name a few. When you sell the home, you do not get any of that money back. The fees don’t add any value to your home, they’re just the cost of doing business. 

Closing costs can represent up to 5% of the purchase price. That means from the moment you buy a home you are already in the hole. Closing costs have the effect of making you pay more for a home than it’s worth. The home must appreciate in value before you can break even.

But wait, there’s more. What happens when you sell a home? The same thing. You have to pay seller’s closing costs. The realtor’s commission represents the lion’s share, typically 6% of the sale price.

Too Young to Own a Home

Despite all of the fees involved in buying and selling a home, owning a home is a great investment. Several years of average real estate appreciation will make those fees look like peanuts. The key is several years. You must remain in a home for a number of years for it to be worth it.

When we are young, most of us can’t predict where we’ll be in a few years. Maybe we’ll join the military or go to college or just start working. Maybe we’ll get a job over here or fall in love with someone who lives over there. It’s all too unpredictable to buy a home and expect that we’ll stay in it long enough to be a good investment.

The irony of it is, it’s the financially conservative who are chomping at the bit to buy a home. They see renting for what it is – a fool’s gambit. Making the landlord rich while paying off their mortgage in exchange for nothing more than a place to live.

You have to be patient and wait until you’ve settled down. The only thing more foolish than renting is becoming a serial homeowner. If you start buying and selling homes in rapid succession it will quickly turn into a race to the bottom.

The Last Word

The life event for most of us that marks the point when we settle down is having children. Suddenly there’s a cute little person who relies on us for their very existence. It’s an awesome responsibility and it brings about a great deal of maturation. 

How young is too young to own a home? If you can’t say where you’ll be in five years, you’re not ready to own a home. On average, that’s how long it takes for a home to appreciate in value enough to overshadow the cost of buying and selling it.

In the meantime, you can make renting as affordable as possible. That way you’ll be better prepared to buy a home when the time is right. Live somewhere safe but not extravagant. Run from anyplace that characterize itself as “luxury apartments." If ever there was an oxymoron, that’s it.

For the financially-conservative, it’s hard throwing money away each month on rent, but there will be plenty of opportunities to become a homeowner. Resist the urge to buy too soon. In the long run, you’ll come out ahead by waiting until you’re ready.

Photo credit: Pixabay Eggstack News will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.
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MIKE BALLEW
Eggstack founder, Financial Planning Association member, engineer, and software developer.