How Much Home Can I Afford?

Nicole Rueth - February 4, 2020

How Much Home Can I Afford?

By Nicole Rueth, Producing Branch Manager for The Rueth Team - Fairway Independent Mortgage

Last month, we discussed getting comfortable with being uncomfortable and how adjusting morning habits can achieve your New Year’s resolution, whether that be saving up enough for a new home down payment, improving your overall financial situation, and learning from failure. This month, we’re narrowing the scope of your big dream of long-term wealth and financial security to a real, achievable goal: Buying a home.

Often, millennial first-time homebuyers are intimidated to start the process of homebuying because they feel the tasks are daunting. For some, high home prices can even seem unachievable. Committing to one residence and location for a long period of time may seem restrictive. And, many believe there’s a long, complicated process between identifying a home and actually buying it… not to mention coming up with a large down payment, credit issues, or innumerable other factors.

The up-and-coming millennial generation makes up about a third of all home buying, but what’s most interesting about the millennial generation is how late to the game they’ve started buying real estate. Slow wage growth, getting married later in life (or, not getting married at all), high student loans, and many other factors are pushing millennials to buy homes much later in life - not preventing home buying altogether.

According to CNBC, millennials aged 25 to 35 are buying homes at a rate of 8% less than GenXers and baby boomers at the same age. The silver lining is that they are buying homes, and we’ll start to see more of it as they age; they just have more complications to home buying than their parents had!

Another interesting fact about the up-and-coming millennial generation is how many of them are paying high rent prices. When I speak with prospective homebuyers who have no idea how large of a loan they can afford, I always ask: How much are you paying in rent?

An entire generation of millennials are renters. They appreciate the convenience of being able to travel easily and the ability to call the landlord when something goes wrong. The problem is they’re paying astronomical rent rates; money which could otherwise be invested in their dream home and padding their future retirement accounts.

Did you know, if you spend $1,200 per month on rent, you might be able to afford a $250,000 home with 20% down and an APR of 3.92%? Assuming 20% down and APR of 3.92%, we can show how much home you can buy according to your rent payment:

Real estate is and will always be a much better investment than renting. We have no crystal ball and no way of knowing for sure how much your home will be worth in 5-10 years, but one thing is certain: values have and will always increase over time - even after major recessions.

You simply can’t take advantage of investing in a home if you’re renting. Home investment is the #1 wealth generator in the U.S. and - other than one’s education level - is the best method for improving economic mobility.

Check out my earlier blog which discussed millionaires always come from real estate, and steps you can take to start making your millions today. Check out and subscribe to my YouTube page, where I interviewed three clients who became millionaires… and gave away valuable tips - for free.

If you’re interested in buying or investing in a home and have no idea where to start, call The Rueth Team. As Denver’s #1 Mortgage Lender, we have built a trusted reputation based on education, keeping the process simple, and becoming lifetime advisors for customers. First time home buyers - especially millennials - often have no idea how much real estate can add to their income outside their primary jobs, and it’s so important to start planning ahead early.
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