If you’re a millennial considering buying your first home, this is for you.

Aaaah. Interest rates. If home buying has been on your mind, then you’re aware that interest rates are rising. This, following a summer where the average rate on a 30-year fixed-rate mortgage dropped to 3.44%, according to freddiemac.com. Compare that with the average rate of 4.09% for the week of January 15, 2017. What’s more, the Fed is expected to make several additional rate hikes this year.

Do you feel like you’ve missed an opportunity? Maybe you have friends who bought homes when the market was near historic lows last year, scoring incredibly low rates. But not you. Now you’ll have to settle for a rate in the fours at least. Well, don’t despair just yet.

shutterstock_558750061“When I was your age…”

Sometimes it helps to take a look back to gain some perspective. Specifically let’s look back to the early 80s – when your parents may have been considering buying their first homes. The annual average interest rate on a 30-year mortgage in 1981 was 16.63%! The average annual rate decreased after that, but until the early 90s, rates were still above 10%. Even if you account for the difference in the median home price today versus 35 years ago, all else being equal, your parents paid significantly more money in interest alone on their first home than you likely will. Kind of makes 4% sound like a deal, right?

 “Freedom” isn’t free       

Perhaps one reason you haven’t pursued homeownership is you don’t feel ready to put down roots. Renting gives you the relative freedom and flexibility to move around as you please, often with as little as 30 days’ notice. However, that freedom comes at a price.

If you pay $1,400 each month in rent for three years (assuming no rent hikes), you will have effectively helped your landlord reduce his or her own mortgage by over $50,000 and yet you have nothing to show for your investment. If instead, you purchase your own home and pay down your mortgage for three years, you have the potential to gain considerable equity.

When does it make sense to buy?

There are a number of variables at play when determining the best time to buy a home, but one helpful number to consider is the breakeven horizon for buying versus renting. This figure essentially estimates how long you would have to live in a particular area before buying became more financially preferable to renting.

Zillow provides rental market overviews for major metro areas in the United States that include a breakeven horizon. For example, if you look at the Nashville Metro area, Zillow’s “hottest housing market” this year, the breakeven horizon is only one and a half years. So it may be more beneficial to buy in the Nashville market if you see yourself staying put there for more than a couple years.

Salt Lake City and Denver, also on the list of hot markets for 2017, also have breakeven horizons less than two years – at 1.8 and 1.9 years, respectively. Home values in all three of these markets are projected to surpass the national average increase of 3.5% over the next year.

“I probably can’t qualify”

Even if you have student loan debt or less-than-perfect-credit, you may still qualify for a mortgage. You may even be eligible for a first-time homebuyer grant. If you don’t have much saved for a down payment, you may be able to take advantage of down payment assistance programs that require little to no down payment. The Chenoa Fund program is a great example. Your loan officer will be able to help you find the program that best meets your particular needs.

So while it’s true that not everyone who applies for a mortgage will qualify, don’t count yourself out.

At the end of the day, you’re the only one who truly knows if you’re ready to take the leap into the home buying process. Just don’t let fear of rejection keep you from missing out on something great. And, even if you end up with a rate closer to 4.5% than 3.5%, you can take comfort in the fact that it’s not your parents’ interest rate.


Castle & Cooke Mortgage, LLC® (NMLS #1251) is a leading independent mortgage lender headquartered in Draper, Utah, with locations across the United States.

Restrictions may apply. Not all who apply will qualify. Program qualifications & offerings are subject to change at any time. Equal Housing Opportunity. Castle & Cooke Mortgage, LLC is licensed in AL, AZ, CA, CO, CT, FL, GA, HI, ID, IN, IA, IL, KY, MD, MI, NE, NV, NM, NC, OK, OR, TN, TX, UT, WA, WI and WY. Castle & Cooke Mortgage, LLC is licensed by the Arizona Department of Financial Institutions Arizona Mortgage Banker: BK-0908287. Castle & Cooke Mortgage, LLC is licensed by the Department of Business Oversight, under the California Residential Mortgage Lending Act License #4130740. In Colorado, Castle & Cooke Mortgage, LLC is regulated by the Division of Real Estate. Georgia Residential Mortgage Licensee, License #43759. Illinois Residential Mortgage Licensee. Oregon Mortgage Lending License #ML-4090.