As an investor looking to maximize your wealth-building potential, you may be exploring different avenues to help you achieve your financial goals. One innovative approach gaining traction in the real estate market is through programs like Roots, a real estate investment trust (REIT) based in Atlanta that helps renters of its properties build wealth towards homeownership.
Take, for example, Will Hunnicutt, a 30-year-old social worker who found a $1,050-per-month two-bedroom apartment tied to Roots. By investing his $1,000 security deposit in the REIT, Hunnicutt has earned an additional $200 in quarterly rebates for taking care of his unit and paying rent on time. This passive income is not only helping him afford his current living situation but is also serving as a stepping stone towards his ultimate goal of buying a home.
Roots is just one of the many innovative programs aimed at helping consumers get financially ready to buy a home. As the dream of homeownership continues to move further out of reach for many due to rising home prices, exploring programs that assist with down payments may be worth considering.
According to a 2023 CNBC Your Money Survey, nearly 40% of Americans who do not own a home attribute their lack of savings for a down payment as a barrier to homeownership. This is where down payment assistance programs can make a significant impact. These programs come in various forms and from different sources, including state agencies, cities, nonprofits, financial institutions, and mortgage lenders.
For example, the Alternatives Federal Credit Union in Ithaca, New York, offers down payment assistance programs ranging from $9,000 to $20,000, while the Chicago Housing Authority can provide assistance of up to $20,000. These programs play a crucial role in working towards equality in homebuying and overcoming systemic barriers that have historically hindered homeownership for many Americans.
Experts suggest that buyers often overestimate the amount they need for a down payment, with the typical first-time homebuyer putting down around 8% of the home purchase price. Some loans require even less, as little as 3.5% or even 0% down. While putting down less than 20% may require private mortgage insurance (PMI), strategies can be implemented to have this removed once you reach 20% equity.
When it comes to saving for a down payment, financial advisors recommend prioritizing low-risk options for short-term goals. High-yield savings accounts, certificates of deposit, or Treasury bills are ideal for buyers with a timeline of up to five years. Despite the allure of investing for potential higher returns, it’s crucial to have liquidity and stability in your savings when you are close to making a significant purchase like a home.
At Extreme Investor Network, we understand the importance of making informed financial decisions that align with your long-term goals. By exploring innovative programs like Roots and understanding the various down payment assistance options available, you can take proactive steps towards homeownership while building wealth for your future. Stay tuned for more valuable insights and resources to help you navigate the world of personal finance and real estate investing.