Renters will sacrifice to buy a home, study shows
(MoneyWatch) The changing perception of homeownership - that it's not the investment it once was - has not deterred a generation of renters from wanting to own a home.
As houses hit their most affordable prices in decades and mortgage rates continue to drop, home ownership remains a dream for many Americans, and they are willing to sacrifice lifestyle choices to get it, according to a new study from Century 21 Real Estate.
Eighty-two percent of renters are looking to buy their own home, according to the study conducted in April. Most of those renters - 80 percent - would also sacrifice lifestyle choices such as dining out, shopping, vacations and other luxuries to own their dream home.
Rick Davidson, president and CEO of Century 21, said the survey was meant to get a pulse on the sentiment of today's homebuyers, particularly first-time buyers.
"What the survey tells me, specifically, is that the dream of homeownership is alive and well," he said.
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Buying a home versus long-term renting
Half of the renters surveyed said they would cut back on dining out, 49 percent said they would cut back on shopping for non-essential items such as clothing and accessories and 47 percent said they would give up luxuries like cable packages and trips to the salon in order to purchase their dream home. Ten percent would even reduce their contributions to a 401(k) in order to put money toward a home.
Although home affordability is at its best rates ever - the most affordable they have been since the National Association of Realtors started keeping track in the 70s - price was still the top consideration for those looking at houses. Thirty percent of the respondents who don't own a home list price as the most influential factor to buying, followed by job security and securing a mortgage.
Not surprisingly, few were worried about whether they'd find the right home to buy.
Davidson said there are more mortgage options out there than many people think. The days of zero equity and no doc loans are a thing of the past, but mortgages are not impossible to get.
"There is some sentiment that it's tough to get a mortgage today, but there is a lot of money available for borrowers," Davidson said.
Borrowers have to have skin in the game, he said. Lenders are looking for people that have good credit scores, a job and a good work history. They also look at the debt-to-equity ratio and the debt-to-income ratio to determine a good loan candidate.
The best thing potential buyers can do is get prequalified by a lender to understand what kind of house they can afford, Davidson said. After that, it's about finding the right agent and being the process of narrowing down location, housing stock, and what lifestyle amenities you'll choose for your future home.
