The American dream of owning a home remains an inspiring goal for most renters. Eighty-four percent of Americans still consider buying a home a priority. Sixty-two percent of the renter generation composed of millennials also desire to become homeowners.
If you are one of those chasing the American dream, you’ll realize that homeownership these days has become a more challenging goal to attain. Among the top reasons is the cost barrier of saving a 20% down payment for a home. High cost of living, rising rent prices, and student debts also contribute to the difficulty of putting money aside for a home purchase.
Any opportunity that can help you save for a down payment and lets you buy your home sooner than you expect would be a welcome solution.
How Much Do You Need to Save
The amount of home to buy and the amount of down payment to save varies based on the homebuyer’s earning and savings capacity. For instance, young millennials in the workforce with a median annual salary of $47,034 are looking at affordable homes priced between $100k to $200K. Others with a slightly higher income look at $200k – $300K homes. With these prices in mind, future homeowners would have to save somewhere between $20k to $60K for a down payment.
Saving For Down Payment
Prospective homebuyers consider saving for a down payment as the biggest challenge in homeownership. An upfront 20% down payment gives you the benefit of being qualified for mortgage financing, getting the lowest rate possible, and not paying for private mortgage insurance. However, this amount is considered a large expense and can be quite difficult to put up if you are also dealing with student loans, consumer loans, and day-to-day expenses.
How Long Will It Take To Save
The average American has an average disposable income of $47,763 and can only afford to save 6% or roughly $240 per month. For instance, if you are eyeing to buy a home at a price of $150k, saving for its down payment will take you at least 10 and a half years.
If you pay less than a 20% down payment, you will be required to take up mortgage insurance with a premium of about $300 added to your mortgage payment. You may have gotten away with low money down, but your mortgage payments will cost more until you have built enough home equity that usually takes around 11 years of payment.
Other Initial Costs For Homeownership
You should also consider other initial costs associated with buying a home. These include closing costs which are 5% of the home purchase price, moving costs, furnishings, and home association fees.
The required down payment and other initial costs make up for the biggest hurdles millennials face in buying a home. This is the reason why they rent longer based on a survey by Apartment List. If you’re a renter in the same predicament, know that there is a way you could save funds much faster with little to no effort on your part.
StreetCred Can Help You Buy A Home
Poplar Homes empathize with renters desiring homeownership but are struggling to save up for it. So we created a product called Poplar StreetCred that lets renters achieve their dream of owning a home faster than they would have expected.
How Poplar StreetCred Helps You Save For A Down Payment
If you’re a Poplar renter, chances are you’re already saving up for a future home purchase with Poplar StreetCred. All qualified Poplar renters are automatically enrolled in the StreetCred program. Every time you pay your rent, you earn a 20% equivalent in the form of credits in your StreetCred account.
Your credits do not expire and continue to build as long as you remain a Poplar resident. You can redeem whatever amount of credit you have on StreetCred when you’re ready to buy a house. Just choose homes in the market within the Poplar network or assign Poplar Homes as your buyer’s agent if your home choice is outside of our network.
Say your rent price is at $2k and you plan to remain a renter for five years until you have saved enough funds for a down payment, your credits by that time would have amounted to $24k. You save this much without costing you extra money on your rent. You can use the credit amount to pay a portion of your closing costs or HOA fees when you redeem them.
How Soon Can You Buy Your First Home With StreetCred
You can simply make a side by side comparison of the down payment you can save on your own versus the amount you can save with your StreetCred. We made a simple computation to show you just how much sooner you can pay for a down payment.
In this example, we assume the following given amounts:
Target Home Price: $150,000
20% Down Payment: $ 30,000
Monthly Rent: $2,500
Monthly StreetCred Earned: $ 500
If you’re only able to make $200 in personal savings a month, you’ll be able to make a downpayment in 12 and a half years. Meanwhile, your StreetCred earns you $500 a month in credits, allowing you to save $6,000 a year. That means you’ll be able to make a downpayment in five years. That’s seven and a half years sooner than you originally planned.
If you are planning to rent for a long time until you’ve saved enough to pay for your down payment or initial costs, then being a Poplar renter will help you reach that goal much faster.
How to Get Started in Poplar StreetCred
If you’re interested in joining this program, all you have to do is become a qualified Poplar renter. That means you’ve submitted all the necessary documents, passed the tenant screening process, and signed the lease. It’s that easy. Your immediate rent payment will start to earn credits in your account and will remain intact until you use them to buy a home. If you do not wish to renew your lease in the future, your credits will remain in the system until you return as a Poplar renter.
Earning points will not cost you any money. The rent you pay is the same amount published on the listing and in your lease, and what your homeowner will get every month as rent. Your credits will be covered by the commissions paid to Poplar when you assign it as your buyer’s agent.
No matter how difficult homebuying is these days, you don’t have to give up your dream of owning a home. Despite the uncertainties surrounding homeownership you can still achieve your goal by making your rent money work for you as a Poplar renter. Now you no longer have to feel like you are throwing money away each time you pay your rent. With StreetCred your rent payment now has more value.