For many millennials, making the jump from renting to buying a house has become exceedingly difficult due a myriad of financial factors, such as student loan debt and a high cost of living. To get around these barriers, millennials are teaming up and buying together—a new trend that is taking the housing market by storm.
Amidst the many financial advantages behind buying a house with a friend, here are three main benefits you could expect.
Easier Home Loan Qualification
For most first-time homebuyers, it could be difficult to get a home loan, also known as a mortgage loan. Due to stricter regulations, if you have a credit score below 700, qualifying for a conventional home loan could be challenging. If you don’t qualify for a 100 percent financed option—as offered by Van Metre’s Intercoastal Mortgage Company—you could be asked to pay at least a five percent down payment. If qualifying for a loan seems unrealistic, buying a house with a friend is something you may want to consider.
If your friend has a better credit score and salary, your odds of being approved for a mortgage loan will improve if you apply together. The mortgage lender will aggregate your two incomes and credit scores into one, and then use those averages to approve or reject your application. By applying together, your probability of getting qualified for a mortgage loan could skyrocket.
A Lower Overall Cost of Living
Unlike previous generations, millennials are sharing and renting homes with friends well into their mid-thirties—with 35 percent of younger millennials and 23 percent of older millennials still living with roommates. The leading reason for this phenomenon is student loan debt, which has delayed 80 percent of younger millennials and 86 percent of older millennials from purchasing a home. With large monthly payments, millennials are often unable to save enough to afford a new home.
By purchasing a house with a friend, you could actually begin saving money through a fixed-rate mortgage which allows for more expense predictability. With average rental prices in Northern Virginia increasing three to four percent year-over-year (or higher for rentals closer to the metro), buying a house could help stabilize your annual expenses over time. And if you split monthly utilities and maintenance fees with roommates, you could end up saving more year-over-year.
Bigger Tax Deductions
When applying for a mortgage rate, you acknowledge repaying the loan through accrued interest rates in monthly installments over a long period of time. Often, these monthly mortgage rates are lower than local rental prices. Unlike in the case of renting, the interest you pay on your new home’s mortgage can be deducted from your taxes. However, it is important to note that the total interest you can each deduct from your taxes can’t exceed the total interest paid on that year’s mortgage.
Making Your Move
If you’re in a trusting and long-lasting relationship with a friend or significant other, buying a house together will not only speed up the process of purchasing a home, but it could also save you money long-term.
Before making the financial commitment to purchase a home, make sure that your current life situation supports the investment.
Van Metre Homes offers homebuyers assistance with its owned lending affiliate, Intercoastal Mortgage Company. Offering a wide selection of highly competitive financing options and in-house title and settlement services, you’ll be guided through the entire process from your initial home search to your settlement date. Visit our communities or financing pages to learn more.