You'll Know You've Made It Financially If You Own This Type Of Home

The dream of owning your own home is one that millions of Americans share. Taking the keys to a property that you can truly call yours is a liberating feeling. No longer will you have to think of your digs as temporary, or seek to minimize alterations or damage to the walls and other surfaces. The dreaded security-deposit-protecting days are over, giving you the freedom to remake the property in virtually any way that you can imagine.

But the transition from renter to owner is quite a daunting financial adventure. Saving enough money for a down payment isn't easy. The median down payment figure from the first quarter of 2024 was $26,700, with first-time buyers typically contributing around 8% (and repeat buyers averaging 19%) at the end of 2023. More importantly, this change is a big financial step, but it doesn't signal that you're necessarily on solid ground or heading in a positive fiscal direction. There are actually plenty of ways in which homeownership can weaken your financial standing. As a homeowner, you'll want to make sure that your budgetary picture is looking up, even if it might seem a little strained at times. Here are some key signs in the underlying status of your home that indicate positive movement and a stable financial footing.

Finding yourself as a "house poor" homeowner is all too common today. With median home sale prices in the second quarter of 2024 remaining high (down from the previous quarter slightly, but still clocking in at $412,300), it can be tempting to explore ways to stretch your budget to make the purchase work. Even the most diligent savers and planners may come up against a brick wall when it comes to available homes in their area. Competition can be fierce, and prices remain out of reach for plenty of young buyers looking for their first home.

By opting to take on more debt to make a home purchase work, you lock yourself into higher repayments throughout the lifetime of the loan. An extra few hundred per month might seem like a small price to pay for a home that you can call your own. However, this extra expense cuts into the free cash you have available for things like furniture in the new place, the electricity bill and other utilities, and can even stifle other decisions you might be considering for the future. More than half of all Americans have delayed at least once important life decision based on their finances in the last year (a statistic among some of the more unsettling realities of modernity). This could mean an important goal that you and your partner share like getting married or having a child. Becoming house poor can also delay other financial goals like saving for a vacation or retirement.

Today, plenty of Americans look at the real estate market with dread. Rather than going in over their heads with a mortgage they'll have trouble maintaining right from the start, they're investigating homes that need a little (or a lot) of work. The wave of baby boomers exiting the housing market that will continue over the next 20-plus years will change some of the calculation that house hunters are looking at. For starters, plenty of home stock that will come onto the market won't be modern-lifestyle-ready. Older homes often pack in plenty of character, but they lack things like outlets on either side of the bed or space for a larger fridge and open, light-soaked kitchen dimensions. From function to style, new buyers often find a lot left to desire when purchasing an older home. This means renovations, repairs, and upgrades.

A property that was purchased out of foreclosure can provide a lower entry cost to get into homeownership, but often a larger challenge to create a livable footprint. Whether you're a brave DIYer or someone who will hire the help you need to lay floors or repair pipes, the early days of a cheaper house with problems means a home purchase that continues to cost you money. Getting past these repairs and improvements is a sign that things are turning the corner. Of course, this route can save you plenty of cash, but it's potentially long and full of surprises.

Many homeowners see the value of their property continuing to increase over the years and consider getting into the real estate market in a different way. In addition to the home you live in, it's a potentially lucrative option to invest some of your savings in a second piece of real estate that can give you a profit on a flip sale or monthly rental income. Rather than focusing all your efforts on investing in the stock market, buying real estate as an investment can provide new value to your portfolio. You might even consider opening a self-directed IRA to nestle a new real estate investment conveniently into your retirement portfolio.

Now, it's essential to keep in mind that all investments come with risk. Real estate can provide better upside in certain circumstances when compared to stocks and other assets, but this improved earnings potential comes with increased volatility. Flippers have to be locked into the market to eke out profits, and they often commit huge time and energy to each investment property they target. Rental properties can be damaged severely by tenants or see profits dry up if a renter decides not to pay and squats in the home instead. The challenges are widespread, so the marketplace isn't for everyone. However, if you own a second home designed to generate income you are tapping into something that the wealthy know well. Equity earnings are the greatest source of wealth generation in the U.S. marketplace, so real estate holdings have the potential to set you up for major financial stability.