If you think back to your grandparents' era, they probably purchased their first house when they got married, which could have been as young as 18 or 19 years of age. They also lived in that same house their entire lives, raising their family.
Chances are if you still have your grandparents, they're still living in that same house today.
Your parents, on the other hand, may not have done it the same way. Baby boomers and Generation X parents have likely moved a few times, not once expecting their first house to be their last.
There are many studies as to why this may be, and many factors could have played a role including inflation affecting home prices to the point one couldn't afford a single family home as their first purchase.
This challenge exists today, but younger home buyers are also now making more money than their parents did at the same age.
Purchasing a home in your twenties is the best start to your financial future you can make. Not only does it allow you to build equity at the right rate to keep moving up and gaining with each purchase, but it sets you up for a strong retirement later on as you won't need to worry about housing costs, which can be upwards of 50% of your income in certain situations.
We have some tips on how to plan your first home purchase properly to gain the most in your future.
Financial Commitment
Financial Commitment Purchasing a home is a large financial commitment, but one that's virtually guaranteed to pay back in multiples later. While owning a home renders a lower monthly payment than rent (depending on the home you buy), it also comes with the need to upkeep and upgrade your home, which comes at a cost.
A home purchase is not a short-term investment; in order to reap the benefits of home ownership, you typically have to stay in your home for three-to-five years minimum. This will allow your home to naturally gain equity due to rising home prices, but also gain enough equity through the payments you're making on the principle balance of your mortgage. If you expect to purchase a home and sell/move to a new home in less time, you'll likely lose any equity you've built up to Realtor fees, so it is not the most ideal situation.
The longer you remain in the same home, the far more profitable you'll be in the long run. This means your first home purchase should be the right one to plan your financial future. It's a big commitment, but working with a builder means you have guidance through the entire process. Ask plenty of questions, and be sure to fully understand your custom home purchase agreement.
Building Custom As Your First Home
Looking back to your grandparents, they had it right purchasing one home to last them a lifetime. You may not imagine remaining in the same home for sixty years or more, but if your first home is planned and chosen with your future in mind, you gain the most out of a home you'll love enough to want to stay in for the long run.
In a custom home, you'll have the opportunity to create spaces exactly how you want and need them, so you won't be "settling" in your first home and constantly aching to search for the next home. It may mean your first home costs you a little bit more to start, but the financial status you'll gain while you pay that home down is worth the additional costs. Think about long-term value when assessing the true cost of a custom home build.
Consider having everything you need included in your mortgage. Things like landscaping, air conditioning, or other add-ons to complete your home are more difficult to find the money for after you move in than if you'd simply added them into the home purchase. Yes, you are paying interest on those items, but you'll also rest easy moving into a home where you won't need to worry about finding the finances for the add-ons later.
Work with a Reputable Lender
Work with a Reputable Lender To obtain the best financial future, you'll want to work with a proper lender such as a bank's mortgage specialist for your mortgage and other lines of credit. Banks may not offer you the absolute bottom interest rate available, but you'll be able to trust your mortgage is in place and easy to renew when your term expires.
Banks will also work with you to establish other credit such as credit cards, auto loans, and lines of credit that help build your credit rating and solidify your future.
Mortgage brokers work with all the reputable banks as well as trust companies, and they may be able to offer you lower interest rates, when it comes time to renew or renegotiate your mortgage.
Talk to your custom home builder about their preferred lenders, too, as these professionals have specific experience working with custom home builds.
Your first home purchase should be the most exciting one you experience, and it should be the right financial commitment for today and for your future. By building custom, you not only get the exact home you'll want for many happy years, but your money will be safely invested in a home you know will retain and gain value.
