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10. Buying Your First Home

You have probably heard of the popular statement, ‘If you want to buy a home you have to save up to 20% of the value for down payment.’ If you don’t you will be forced to pay private mortgage insurance, which could really dent your account.

What you won’t learn in school is that while higher mortgage payments may be painful, the financial trade-off between paying more money now and waiting to save up the 20% deposit could be worthwhile.

When we look at macroeconomic factors in the US over the past decade, the appreciation rate of real estate has really gone up but the wage levels have remained stagnant. So it makes it unrealistic to start saving up 20% of the home value as it will only increase drastically over the years.

The rule behind this is if you have the capacity to save the money within at least five years comfortably, then go for it. But, if it will take you longer, you’ll be chasing a moving target as the prices increase.