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Buying a home is easier than you think

In the Twin Ports and nationwide, we've seen a trend: Young people, and especially millennials, are buying homes at a much lower rate than previous generations.

Why? Theories include excessive student loan debt and a lack of long-term employment opportunities, both of which have become a burden for young people as they try to establish solid financial futures. Some also wonder whether millennials, having seen their parents and others suffer from the effects of economic downturns, including waves of home foreclosures, simply don't want the additional risk of home ownership.

All of these concerns are real. But as a banker, I will tell you that all are issues we have seen before with individuals who never thought they could buy homes. After working with a local community bank, many of these individuals are proud homeowners today.

Let me take you through some of the steps we have used to help homebuyers, who never thought they could achieve the American Dream, do just that.

A house doesn't have to be forever. A big obstacle for many homebuyers, especially first-time buyers, is a worry that once they buy, they're locked in forever. They won't have the flexibility for job or lifestyle changes or even a different home.

In reality, mortgages have become much more flexible. Most of us will own more homes in our lifetimes than our parents and grandparents did. Home prices also are reasonable and interest rates remain near historic lows. As long as you make sure your loan has no prepayment penalty, you should have plenty of flexibility to buy and finance a home and still accommodate changes in your life that may require you to look at other housing options down the road.

Renting costs as much as or more than buying. Especially in our market, this is true. With a limited number of rental properties, the cost to rent here can be greater than the amount a typical first-time homebuyer would pay in a monthly house payment.

Yes, homebuyers need to put money down to buy and that can be an obstacle, especially if student loan debt and the applicant's employment situation present issues. But even in those cases, it makes sense to talk to a banker. There may be opportunities to overcome the down-payment hurdle with government and veterans' programs, if you qualify. Once we get past the down payment, the monthly cost of buying often is about the same as renting for many first-time buyers.

Pay yourself instead of a landlord. The biggest benefit to home ownership is that buyers pay themselves instead of a landlord for the right to live in their home. This is called building equity, essentially building your ownership stake instead of watching all of those rent dollars go to someone else.

Also, there is still a significant tax advantage with home ownership. The interest you pay, as well as some of the closing costs, are tax-deductible each year.

When we sell, we benefit from the equity we have built up in our homes as well as increased market value. For most of us, that helps purchase our next home, often a larger home that can accommodate lifestyle changes such as a growing family. For most of us, home equity will be our single largest investment. So it's best to start early and watch your investment grow.

The financial issues facing millennials and other young prospective homebuyers are real. But many of those issues are not unlike the financial concerns that have worried first-time homebuyers for years. For example, when I bought my first home in 1979, interest rates were at 16 percent.

Today we have more options than ever to help young people and others achieve the dream of home ownership. If you're wrestling with any of these issues, come in and talk to your local community banker. Find out which options might work best for you.

Dale Lewis is president and CEO of Park State Bank in Duluth. You can reach her at president@parkstatebank.com or (218) 722-3500.

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