Yet they can’t afford the right home for the right reasons, either. Here’s how to fix both problems.

4 minute read

Jealousy not only eats away at your soul, it can devour all your money. If you don’t believe me, just take a look at the latest poll from LendingTree.

To be clear, LendingTree’s poll, released Tuesday, was about home ownership. The online lending marketplace quizzed more than 2,000 adults between the ages of 18 and 75. My conclusions, however, aren’t financial. As usual, they’re psychological – because money drives people crazy.

Why renters wants to buy

You don’t need a poll to know the housing market is red-hot these days. Everyone is keenly aware of it, including renters who long for a place to call their own. There are solid financial reasons to crave home ownership, none better than the simple fact that homes usually appreciate in value. Unlike a new car that loses half its value the moment you drive it off the lot, homes can easily double in value depending on where you live.

Yet that’s not why renters want to buy.

Most told LendingTree they simply want to “customize their home to their liking” instead of having “to abide by a landlord’s rules.”

“This is a major selling point,” LendingTree concluded. “Flexibility to do what they want with the space is the most popular reason for wanting to own a home.”

More than 6 in 10 respondents – 63 percent, to be exact – cited this as the primary reason they wanted a home.

The right decision for the wrong reason

The problem with buying a home for purely emotional reasons – and at 50 percent, “pride of homeownership” was also a top response – is that you’ll convince yourself to buy a home you can’t afford.

It also means you’re often disappointed with the idea of buying a “starter home.” It might be smaller than you want, with less opportunities to customize it like you want. Its curb appeal isn’t as impressive, and the photos you post on Facebook won’t make you proud and your friends jealous.

LendingTree didn’t pose these two questions, but I wonder what the honest answers would be: “How badly do you want to buy a home to impress your friends? And how jealous are you of those who already have nice homes?”

This would explain the headline LendingTree put atop its survey, which I have yet to even mention: “48% of Renters Worry They’ll Never Be Able to Buy; Down Payments Biggest Barrier.”

Those renters’ worries will come true, if they don’t start looking at home ownership like they do grocery shopping and oil changes.

How to afford a home: clip coupons

As a CPA and financial counselor for three decades, I’ve met many people who save hundreds of dollars a year – and sometimes that much in a single month – by studiously clipping coupons for everything from food to car maintenance. Yet when it comes time to buy the most expensive item in their lives, they don’t exert the same thrifty effort.

For example, LendingTree says more than half of aspiring homeowners “say they can’t afford a down payment.” The three best tactics for overcoming that hurdle aren’t particularly attractive to many people:

  1. Look at smaller homes. As I mentioned earlier, Americans tend to buy more home than they need. According to the U.S. Census, the average size of a new home in 2020 was three bedrooms and 2,333 square feet. Since the average apartment size is 882 square feet, it’s fair to wonder if renters could buy a smaller home first, then trade up later. A smaller home often means a smaller down payment.
  2. Call a housing counselor. I know housing counselors. I’ve launched such a nonprofit service myself before. These HUD-certified programs can help you find ways to afford a new home, and they should be the most popular people in the world. Yet many potential homebuyers don’t know they exist.
  3. Torpedo your FOMO. Wait for the housing market to cool down. LendingTree is an online lending marketplace, and even it calls the housing market “insanely hot.” No one wants to miss out on a great deal when everyone else is doing it, but buying a home at the top of the market can be the costliest decision of your life.

I haven’t even mentioned the most boring part of affording a new home. Let’s do that now.

Home is where the cash is

In the LendingTree poll, nearly a third of respondents also fretted about their credit score: “Another 32% of folks might be able to afford a home, but their credit score may make qualifying for a mortgage more difficult.”

Once you understand your credit score, you realize that nearly two-thirds of it comes down to just two factors: credit history and credit utilization. In plain English, that means: Do you pay your bills on time and are you maxing out your credit limit?

A poor credit score is a symptom. It means you’re struggling to make ends meet now, as a renter. So you must get your own house in order before you buy a house.

This is where most people start tuning out, because the solution is admittedly not fun. You need to create a monthly budget, stick to it, and stick with it. If you don’t have a monthly budget because you find it too complicated or too boring, then I think it’s safe to say: You’re not ready for the paperwork and the maintenance a home will require.

If you need help finding ways to save for a down payment, here’s an easy place to start. If you’re having trouble figuring out your finances and paying off your debts – and it simply makes no sense to get a mortgage when you have steep credit card balances – then speak with a certified credit counselor and get a free debt analysis. You can do that by calling Debt.com at (844) 394-0582.

So renters, I’ll leave you with this thought: Homeownership begins in your apartment.

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The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the opinions and/or policies of Debt.com.

About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC