Inventory Levels Increased But Remain Low - Bellingham Is Still A Sellers' Market
Why Should I Invest in Buying a Home?
For Your Health
Before we get into all of the practical financial reasons you should buy a home, here is an intagible benefit to owning a home: your health!
The National Institutes of Health (and many other organizations) regularly publish studies connecting home ownership to better health. Their conclusion: "Homeownership can be used to predict the prevalence of several chronic health conditions. Considering its significant influence, public health initiatives should focus on housing-related interventions to improve population health."
Financial Stability
People who have never owned a home may hesitate to buy a home. Buying a home creates financial stability.
Some of that stability comes from buyers making sound financial decisions, including keeping expenses low to help save money for a down payment, and to make credit decisions to raise their credit score, to be an attractive borrower to lenders. For example, keeping an older car rather than buying a car with a loan.
And some of that financial stability comes from not being vulnerable to rent increases and to creating home equity as you pay down your loan and hopefully see your home increase in value over time.
Your Home is an Investment
Apart from the emotional decision, it's important to look at the numbers:
Remember that real estate goes up in value over time, even if there are downturns at times. Let's look at home prices in Whatcom County for residential homes over the last 3 years:
December 2024: Median Sales Price was 11.4% over December 2023
December 2023: Median Sales Price was 3.7% over December 2022
December 2022: Median Sales Price was 6.1% over December 2022
TOTAL Average Median Sales Price Increase: 21.2%!
Affording Your First Home
Buying a home may feel daunting when you look at these numbers. Affordability is definitely an issue. But unless there is a dramatic economic downturn, that issue will only get worse over time. Keep in mind that there are lots of loan programs for first-time home Buyers, to help them get into their first home. Waiting to buy a home means it will likely be harder to afford a home.
The First Step
Save, save, save! This is not just the most important first step in buying a home, it's the single most important thing you can do, to create financial security for the rest of your life. Many of the most important decisions in your life will be impacted the most by your financial situation. Thinking about a career change that might mean a lower income? Considering starting a family? Retiring early? All of these major life events are made possible if you have been financially responsible.
Your income tends to increase as you become older. Your mortgage payment now may feel like a financial stretch, but over time, most homeowners find that fixed payment amount to be manageable.
The other reason to save: the more money you have for a down payment, the lower your mortgage payment. Or if you choose to buy a "fixer", the more money you have saved means the more money you have available to make improvements to your home.
Understanding Home Financing
Before I demonstrate some of the financial benefits of home ownership, here are some important loan terms:
1. Principal and interest payment. The loan amount is called the principal balance. Lenders calculate a monthly payment, called the principal and interest payment (P&I) that will pay down that balance, typically over 30 years. During the first years of the loan, a large portion of that monthly payment goes towards interest on the loan balance, a small portion goes towards paying down the loan balance. As the loan balance is reduced each month, borrowers pay less interest - that difference is then added to paying off the loan balance. By the last years of the loan, the majority of the P&I payment will go towards the principal balance.
2. Equity. This is the dollar amount that the homeowner "owns". If your home is worth $200,000 and your mortgage loan is for $150,000, you have $50,000 in equity.
3. Amortization schedule. An amortization schedule specifies what portion of your monthly mortgage payment pays off the interest on the loan, and which portion pays off the principal balance. The amortization schedule extends for the duration of the loan period, so for a 30 year loan, it would break down principal and interest payments for 360 months (30 years x 12 months). The great thing about an amortization schedule is that it makes it easy to understand how much of your monthly payment goes towards interest and how a loan with a 6% interest rate costs you a lot more than a home with a 3% interest rate. An amortization schedule also demonstrates the equity you are gaining over time, just by virtue of making your monthly mortgage payments (vs. paying rent).