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Wealth-Building Through Homeownership
For renters, housing costs can fluctuate wildly from year to year, especially in places where landlords can increase rent without limits. Homeowners often opt for fixed-rate mortgages, which effectively lock in their cost of housing for decades and can insulate them from volatile economic cycles, said Jung Choi, a senior research associate at the Urban Institute, a think tank.
People who buy their first home before they’re 35 accumulate significantly more wealth by the age of 60 than those who do so afterward, a 2018 analysis by the institute found. “At an age near retirement, you actually have built your wealth for a longer period of time,” Ms. Choi said. The earlier you buy your home, the more time it has to appreciate in value, and the more time you have to pay down mortgage debt.
Homeownership as an engine for wealth-building is what Desiree Gaeta had in mind when she bought her first house at 27, in the summer of 2020. At the time, Ms. Gaeta, who was working as a nurse, gleaned what she could about the power of homeownership through her colleagues. Her parents hadn’t become homeowners until middle age, so she wondered if she could do so in her 20s.
A nurse who also worked as a real estate agent explained to Ms. Gaeta how to estimate what she could afford. For years, Ms. Gaeta had been putting money in a savings account and was surprised to learn that she had enough for a down payment on a house in Charlotte, N.C. As a first-time home buyer, she qualified for a Federal Housing Administration loan, a government-insured mortgage that required Ms. Gaeta to put only 3.5 percent down, based on her credit score.