- All right, Andini, so welcome to Townhome G.
This is a four-bedroom, four-bathroom...
- Have you dreamt about owning a home?
- That's 2,250...
- Imagine going to your first open house:
You're greeted by a real estate agent,
and you get a grand tour.
- As well as an additional two closets...
- You tell the agent that you have—
$1,000—
ready to buy the home, but you find out that it's...
- 1.4 million dollars.
- Can anyone afford that number?
Do people even know how much
an average home in NYC costs?
- That's a good question.
- It's hella expensive here.
- At minimum, like, half a million dollars.
- That might be a little tough.
- Does anyone believe that they can afford a home?
What exactly does it take to own one?
So this might sound obvious,
but homeownership is either
owning the home you live in outright,
or making an arrangement with the bank
where you will pay them to eventually own the home.
Homeownership is an investment
that can help build wealth over time.
But, as the average price of a home in the United States
fluctuates year to year,
that's an investment not everyone
can make— or should make.
I don't know about you, but 400K seems like a lot of money
that I don't have.
So, how are the younger generations
supposed to afford homes?
We'll get to that.
But first, let's look back
into when homeownership became more accessible
for the everyday American.
During the 1800s in the U.S.,
the only way to own a home was to pay for it outright,
or build it yourself on the land that you owned.
By the 1860s,
some banks decided to lend people money
to purchase homes.
These loans were known as 'mortgages,'
and by the 1890s, they were increasingly popular.
However, homeownership was still not
nearly as successful
as it is today.
The GI Bill of 1944 helped establish
low-interest mortgages for World War II veterans,
and created with it, a huge demand for housing.
This eventually led to the creation of the suburbs.
Well, hello, McKenzie.
Thank you so much for joining me here today.
- Hi, I'm so excited to talk
to you all about homeownership today.
- How does homeownership differ from renting?
- Homeownership is owning the actual asset of a house:
You own the house, or you own the apartment.
With homeownership,
you're paying someone on a monthly basis,
and you actually own the entity.
- So, what are the benefits for investing in a home?
- Homeownership is an investment in yourself,
and it's an investment in your future.
Aside from just the incredible financial security
and longevity,
is that your home poses as an investment.
So, the good ol’ term of 'equity'—
home equity is the actual dollar amount
that you own of your property.
So, if your home is $1,000,000
and you have $500,000 into it,
and then the bank has loaned you the rest,
what you own is $500,000 worth of equity in your home.
Over time, each month, you're paying a mortgage
and so every month that you pay,
you are gaining more equity in your actual property.
Other ways to grow equity
in your home are to increase the value
of your home by remodeling
the new kitchen or new bathroom.
- Okay, I love that.
So, this is a bit in the future for myself,
but could you tell what the steps are for buying a home?
- The first step, for me, is getting our ducks in a row
with our finances, meaning, "Are we going to get a loan,
or are we going to purchase in cash?"
You can also borrow
from the people you know—
so your parents, siblings, your grandparents
can give you a nice lump sum.
You yourself do not have to have the entire amount
of cash needed to purchase, because we can finance.
'Financing' is the process in which you go
to a bank and apply for a loan,
and a bank looks at all of your finances and says,
"This is the amount that we're going to lend you."
The process is called the 'pre-approval process.'
Pre-approval is the most important step because
if you don't know how much you can afford to spend,
then we don't know the price
of the houses that we should be looking at.
Second step is really choosing a great agent
who's speaking your language,
and who knows the market that
you're looking to buy in.
We're the people communicating
and negotiating on your behalf.
- Hmm. Wow.
I am learning so much.
I feel like I knew absolutely nothing about homeownership
so I'm just absorbing everything like a sponge.
Could you walk me through the pre-approval process?
- Yes.
The pre-approval process is run entirely
by the lender, by the bank.
The way that they do it is
by collecting a number of financial documents
to assess your stability and your ability to purchase
and pay off this house over 10, 15, 30 years' time.
Looking at your income, your last two years of tax returns,
how much cash you have on hand,
what your credit looks like,
what your W-2s look like,
what your work history look like—
they wanna know
how financially fit and stable are you, and additionally,
how much money are you able to put down
versus how much money are they going to loan you.
The bank then puts that all into one big package,
and they come back to you and say,
"Okay, we are able to lend you $300,000 for this purchase,
so you can buy a house that's around $500,000 or $550,000.”
So once you have your pre-approval letter,
it's time to start hunting.
I think there's a really incredible opportunity
for young people to take ownership
over their financial futures,
and I think the biggest way that most young people
can do it is through homeownership.
And so, the biggest thing I would say is
if you pay attention and if you focus on it,
you can make it happen just like we do everything else.
- Wisdom. I love that—
putting your energy towards homeownership.
Thank you so much, McKenzie,
truly appreciate your time.
- Thank you, and I'll see you when you buy your next home!
- Yes, I will be back.
While homeownership can seem complicated,
it's worth figuring out to see if it's right for you.
Define your goals and purpose for owning a home,
and really think about
homeownership as an investment.
Buying a home is expensive,
but thankfully you don't have to have all the cash,
because there are many professionals
out there who can help you with financing a home.
Whether it's a few years from now or soon,
I very much look forward to buying a home.
- Okay, good to know.
- All right.
- I'm not ready yet.
- Not exactly,
but there are programs
with banks— - Yeah.
that do as little as 10% down.