Pre-Approval (Homeownership is the Key to Wealth)

A home is more than just a stable or permanent place of living.  For many Americans, homeownership is a key to accumulating money and ensuring financial stability over time. For the 66.1% of American households that owned a home as of 2022, homeownership has only grown in value. Between 2019 and 2022, the median net home value increased from $139,000 to $201,000. Both rising home prices and comparatively stable mortgage debt are the main causes of this increase. 

Today, we'll talk about the benefits of homeownership, how it helps people of all ages accumulate money over time, and how having a mortgage pre-approval streamlines the home-buying process.

Why Homeownership is Important

Owning a home is one of the main steps towards financial independence. Your primary home is not just your living space; it’s a big asset. 

In 2022, the total value of primary residences in the U.S. was $40.9 trillion, which is more than a quarter of all household assets, outpacing other investments like business interests, financial assets, and retirement accounts.

Homeownership Across Different Age Groups

As people age, they tend to build more wealth. This pattern is evident in the data. For younger households (those under 35), total assets were valued at $7.6 trillion. Contrastingly, households with members aged 65 and older had assets worth $65.9 trillion. This ninefold increase clearly shows how assets like home equity, grow significantly over a lifetime.

Interestingly, while the value of a primary residence increases with age, its proportion of total assets decreases. A home is usually the most valuable asset for younger families. However, older families prefer diversifying their wealth into other assets like stocks, bonds, and retirement accounts.

The Role of Education in Homeownership and Wealth Accumulation

Education also plays a crucial role in wealth accumulation. Households with higher educational attainment generally hold more assets. For instance, those with a bachelor’s degree or higher have asset values five times greater than those with only some college education or an associate degree.

Despite this, the primary residence remains the largest asset for all educational groups. However, its share of total assets varies. For highly educated households, the home makes up about 23% of their total assets. These households are more likely to have significant investments in other areas such as business interests and financial assets. On the other hand, for those without a high school diploma, the home represents about half of their total assets, underscoring its importance in their financial portfolio.

Mortgage Pre-Approvals: Make Home-Buying Journey Smoother

When you buy a home, securing a mortgage pre-approval is an important part of the process. It helps you understand your financial boundaries and speed up the home buying process.

Before pre-approving your mortgage, a lender will review your financial details, such as credit, employment, income, assets, and debts, to determine your eligibility for the mortgage. Once you're eligible, the lender will issue a pre-approval letter. This letter indicates the maximum loan amount you are eligible for. It will guide you for your home search within realistic financial limits. It also shows sellers that you are a serious and financially capable buyer.

This pre-approved letter is usually valid for 60-90 days but in case of expiry, you can always get it renewed by submitting the updated financial documents to your mortgage lender.

Since pre-approvals are time-sensitive, get one when you're ready to start looking for a home. Applying for a mortgage involves credit checks, which can slightly lower your credit score. To minimize this impact, consider a soft credit pull for an initial assessment.

Conclusion

Homeownership is a key to financial security and wealth building. It provides a stable living environment and serves as a key asset that grows in value over time. Whether you are just starting out or approaching retirement, owning a home can significantly contribute to your overall wealth.  

Secure a mortgage loan for your dream home with Total Mortgage, a trusted mortgage lender.