2024 Strategies For My Daughter to Combat Rising Mortgage and Housing Costs
Disclaimer: Good Day, Readers. WealthBuildingPowers blog is a financial literacy/competency blog and does not provide specific investment recommendations.
YES, YOU STILL CAN BUY A HOME IN TODAY’S TRYING/CRYING TIMES
When I sold our Illinois home in 2023, we had a 2.67% interest rate.  Millions of homeowners fortunate enough to have a similar rate feel forced to stay put versus accept today’s seven percent mortgage.  We were blessed not to need a mortgage for our Florida property.
You may add over $1,000.00 to your monthly payment if you require a mortgage today.   Because many owners have paused selling until rates come down, the number of homes on the market is reduced.  Many in Amanda’s generation worry about whether they can or should buy.  Today’s blog is the advice I give my daughter.
TWO COSTLY PROBLEMS
While the median U.S. home cost soared 56% and mortgage rates raced up 159%, wages have averaged less than three percent annual growth since 2019.
Chart of Monthly Costs Comparison and Income Requirements
| YEAR | 2019 | 2024 |
| Median Home Value | $270,000 | $420,000 |
| Down Payment -20% | $54,000 | $84,000 |
| Loan Amount | $216,000 | $336,000 |
| Interest Rate | 2.8% | 7% |
| 30 YEAR MONTHLY PAYMENTS | 2019 | 2024 |
| Mortgage Payment | $888.00 | $2235.72 |
| Property Taxes | $200.00 | $250.00 |
| Homeowner’s Insurance | $92.00 | $150.00 |
| Total Payment | $1,180.00 | $2,636.00 |
| Household monthly income recommended to quality for the above loan | $4,215.00 | $9,415.00 |
| Total Annual Income to Afford Median Home | $50,580.00 | $112,908.00 |
Yes, it is more challenging today than a few years ago, but Amanda can still buy a home.
I have a few strategies, some of which I implemented myself!
BUYDOWN YOUR INTEREST RATES
- If changing jobs, ask for a buydown of interest rate from your new employer.
Everything is negotiable.  Mortgage points, also called discount points, lower your interest rate for the life of the mortgage.  A lender may allow borrowers to purchase up to four points.  One mortgage point typically costs 1% of your loan and permanently lowers your interest rate by about 0.25%.  If you took out a $150,000 mortgage, for example, one point would cost $1,500 and get you a 0.25% discount.  Two mortgage points would cost $3,000 and lower your interest rate by 0.50%.  There is no set limit for how many mortgage points you can purchase, but most lenders limit borrowers to four points. Four mortgage points lower your rate by one percent.
BUY DOWN MORTGAGE RATES AND PAYMENTS; ASSUMING $420,000 20% DOWN PAYMENT AND 30-YEAR MORTGAGE TERM:
| Interest Rate | Monthly P&I Payment |
| 7.00% | $2,235.42 |
| 6.75% | $2,179.29 |
| 6.50% | $2,123.75 |
| 6.25% | $2,068.81 |
| 6.00% | $2,014.49 |
FIND AN ASSUMABLE MORTGAGE
- Look for assumable mortgages: Years ago, I assumed a loan on an investment property. Here’s a guide to help you:
- Work with a Real Estate Agent: They can access MLS listings, where they might find notes on properties with assumable loans.
- Online Real Estate Platforms: Websites like Zillow, Realtor.com, and Redfin may have filters or keywords to identify assumable loans.  Look in the property description or mortgage details sections.
- Contact Lenders: Some lenders may have lists of properties with assumable loans. Reaching out to banks and mortgage companies could provide leads.
- Public Records: Assumable loans are often noted in public records. You can visit the county recorder’s office or check online databases for mortgage information and loan types for specific properties.
- Direct Communication: When you find a property you want, ask the seller or agent if the loan is assumable.
- Networking: Join local real estate investment groups or forums. You can find these on Facebook, LinkedIn, etc. Other group members may have leads or know of properties with assumable loans.
ADJUSTABLE MORTGAGE
- Consider an adjustable mortgage that is locked for several years. The Federal Reserve and whoever the next President is want lower rates. Barring an economic crisis, we should see lower rates over the next two to five years. Ensure you can bear the monthly payments if rates increase. When rates come down, look at the cost of refinancing. If there is zero out-of-pocket cost and a lower rate, take it. I think rate declines will be slow, so you may have to refinance several times. Buy a home you will not outgrow for seven or more years. Consider a fixer-upper if you or a family member/reliable friend have the skills to do some of the work.
THERE IS NO BEST TIME TO BUY YOUR HOME
My first interest rate was 14%.  At the time, that was the norm.
Keep saving money for a more significant down payment while you wait.  Â
Avoid buying deprecating things like new cars. I like riding in nice cars, and many of my neighbors have beautiful, sleek cars. I enjoy the features as much as anyone, but I enjoy not having a car payment for decades much more. Remember, new cars lose value the second you drive off the lot. As of mid-2023, the average monthly car payment for a new vehicle in the U.S. was around $725.The average loan term for new car purchases was approximately 70 months.
The paths to financial freedom are UNLIMITED.  CHOOSE YOUR OWN! Â
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St Jude Hospital: The mission of St. Jude Children’s Research Hospital is to advance cures and means of prevention for pediatric catastrophic diseases through research and treatment. Consistent with the vision of our founder Danny Thomas, no child is denied treatment based on race, religion, or a family’s ability to pay.https://www.stjude.org/
Wounded Warrior Project: An American charity and veterans service organization that offers a variety of programs, services and events for wounded veterans of the military https://www.woundedwarriorproject.org
Folds of Honor: Providing life-changing scholarships to the spouses and children of America’s fallen or disabled military. And now, our mission expands to the families of America’s first responders. On our watch, those who protect our freedoms and our families will know they are not forgotten. https://foldsofhonor.org
Wilson’s No-Kill Animal Shelter: A N0-Kill shelter that is a top-rated non-profit. They compassionately care for all their animals. https://wilsoncountynokillanimalshelter.mywcn.com/
Tunnel To Towers: Since 9/11, we have been helping America’s heroes by providing mortgage-free homes to Gold Star and fallen first responder families with young children and by building specially adapted smart homes for catastrophically injured veterans and first responders. We are also committed to eradicating veteran homelessness and helping America to Never Forget September 11, 2001. https://dogood.t2t.org/give/320847/#!/donation/checkout
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BUYING A HOME IS FAR MORE COMPLICATED TODAY- DO IT!
https://wealthbuildingpowers.com/2019/10/14/in-2019-buying-a-home-is-far-more-complex-than-when-i-purchased-my-first-home/
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ABOUT ME
I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an NC. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I left a corporate career because I desired to make a difference as a speaker and writer. I was blessed to be coached and mentored by strong women and men in my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (a small but brilliantly created plant nursery). I am a successful investor in stocks, options, and real estate and am happy to share my finance and investment lessons. I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog as recommendations for your situation. As an investor, you must establish your risk/loss tolerance. Investment in any asset involves risk, including complete loss.
Please seek your licensed CPA or fiduciary financial advisors for individual financial advice.
I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.
