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Buying a home by age 35 is worth it now — and later

While in some ways, buying that first home

While in some ways, buying that first home is more difficult for millennials, they're finding such purchases to be worthwhile. Photo Credit: Getty Images/iStockphoto/Lordn

Nicole Christianson, 26, a sales rep, was tired of writing big checks for tiny apartments. And she wanted to do more with her cash than stash it in a savings account.

One night, she and her husband, Thure, 28, took a look at their newly combined finances and realized that together they had saved enough for a 5 percent down payment on the affordable fixer-upper across the street from their Milwaukee apartment.

MILLENNIALS' HOMEOWNERSHIP GOALS

Eighty-two percent of young adults say owning a home is a priority, according to NerdWallet's 2018 "Home Buyer Report."

But millennials are buying houses at lower rates than previous generations, and it's not hard to see why. Saving up for a down payment and qualifying for a mortgage can feel like pipe dreams for young adults grappling with student debt, underemployment and high rent costs.

Still research shows there are big rewards for those who find a way to buy their first home sooner rather than later.

BUYING YOUNG CAN PAY OFF LATER

Of today's older adults, those who bought their first home from ages 25 to 34 accumulated the most housing wealth by their 60s — a median of around $150,000, according to a report by the Urban Institute, a nonprofit research organization.

In contrast, the median housing wealth for those in their early 60s who bought later (ages 35 to 44), was about half as much, at $76,000. Homeowners who bought after they were 45 had about $44,000 in housing wealth by their 60s.

"Housing wealth" is another term for equity, the difference between the home's market value and an owner's mortgage balance. Equity becomes profit when a home is sold or refinanced, and it's more likely to grow the longer one owns the home.

The take-away for millennials? Buy as early as you can feasibly do so, says Laurie Goodman, vice president of housing finance policy at the Urban Institute.

"It's also forced savings in the sense that you're paying down a mortgage each month," Goodman says. "Yes, you could put away the same amount of money in a savings plan, but people don't."

Thinking about homeownership as part of retirement planning is important for millennials, says Jung Hyun Choi, a research associate at the Urban Institute.

"People are living longer and job stability has declined," she says. These circumstances make housing wealth even more essential.

BOOSTING AFFORDABILITY

Certain mortgage options can reduce the upfront costs of buying a home, allowing younger borrowers to qualify with far less than the traditional 20 percent down payment.

"We wanted to go with a VA lender," says Marissa Avila, 33, a self-employed small-business consultant in Norfolk, Virginia. Her husband Greg, 36, is in the Navy, so they were eligible for a loan guaranteed by the Department of Veterans Affairs. The VA loan helped the Avilas buy their Colonial-style house with no down payment.

Some conventional loans require just 3 percent down, the minimum for a Federal Housing Administration mortgage is 3.5 percent, and eligible borrowers can get a Department of Agriculture, or USDA, loan with nothing down.

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