Imagine yourself 15 years from now. You might want to live in a new city, own a larger home, or have enough savings for your kids’ college or early retirement. How can homeownership help you get there?
Let’s say you buy a starter home today for $400,000. After 8 years, your money grows, and you sell it for a profit. With that extra money, you could move into a bigger home in a neighborhood with better schools, fund your child’s education, or even invest in more properties.
Homeownership isn’t just about having a place to live; it’s a path to financial security. As your home’s value grows, it opens doors to new opportunities. At Tomo Mortgage, we call this the Real Estate Wealth-Building Ladder—a step-by-step journey to long-term financial growth. According to the Census Bureau, homeownership accounts for about 60% of the average American’s wealth, making it a critical tool for building financial stability.
Why is the first home purchase so important?
Buying your first home is a game-changer. It’s like planting the first seed in your wealth garden. For most Americans, this step is made easier with a federally backed mortgage (most of us don’t have several hundred thousand in cash laying around), which helps more people get a foot in the door of homeownership. As you pay off your mortgage and your home’s value goes up, you start building equity. That equity can then be your ticket to buying a bigger place, investing in rentals, or just securing your financial future.
A study from the National Association of Realtors shows how powerful homeownership can be for building wealth. From 2012 to 2022, low-income households saw their net worth jump by $98,900 thanks to their home value spiking, middle-income households gained $122,100, and high-income households added $150,800. Bottom line? Homeownership is a huge factor in financial security, with homeowners having a net worth 40 times higher than renters.
How does homeownership contribute to generational wealth?
Imagine a family has $40,000 for a down payment on a $400,000 home. Alternatively, they could invest that $40,000 in a diversified stock portfolio. Let’s assume they have the option of either buying the house or renting and investing the $40,000 in stocks instead.
Scenario 1: Buying the Home
- Initial investment: $40,000 down payment on a $400,000 home.
- 8-year growth: Home appreciates to $590,000.
- Mortgage payments: Over 8 years, they pay about $300,000 in mortgage, taxes, and maintenance, but they also reduce their mortgage balance by $34,000.
- Equity: After 8 years, they own $264,000 worth of the home after selling and paying off the remaining loan balance.
Scenario 2: Renting + Investing in Stocks
- Renting cost: The family spends $240,000 on rent over 8 years ($2,500/month).
- Investment growth: Instead of a down payment, they invest $40,000 in the stock market. If they achieve an average annual return of 8% (a reasonable long-term estimate for stock market growth), that $40,000 would grow to about $74,000 over 8 years.
Financial Summary
- Owning a home after 8 years: $264,000 in equity.
- Renting + investing: $240,000 in rent paid, $74,000 in stock portfolio value.
Sure with the house you will have additional payments ie maintenance, but the payoff as well as security and stability gained from homeownership far outweighs this in our eyes.
How is the lack of affordable housing threatening the wealth-building ladder?
Climbing the homeownership ladder is getting tougher. Over the past decade, home prices have skyrocketed, way outpacing wage growth and making it harder for first-time buyers to break in. From 2010 to 2020, median home prices shot up over 70%, while household incomes only grew by around 30%. That gap? It’s made saving for a down payment and getting approved for a mortgage a serious challenge.
Plus, the shortage of affordable homes has ramped up competition, pushing prices even higher. In many cities, especially big urban areas, the supply of affordable homes is so low that first-time buyers are getting priced out. The result? A cycle where only those with significant wealth can buy homes, widening the wealth gap even more.
We all see and hear about homes being listed and receiving 10 offers in mere hours, lines around the corner in some areas to get into open houses—yes, that’s still happening. This is an unnatural situation which is driven by not enough homes available where people want to live.
Here are the facts:
- The US population is adding 1.8 million people and 2 million households each year.
- But, it’s only adding 1.6 million new homes each year (meaning 400,000 more families, every year, are simply out of luck if they want to buy).
- Since this imbalance has continued for years, economists now believe the pent up demand for new homes is between 1.5 and 3.8 million.
So, until we close this gap, the people with the least economic means simply won’t have fair access to the American Dream.
How can mortgage companies support homebuyers on the wealth-building journey?
We believe that offering the lowest mortgage rates in America is just one piece of the puzzle. We also provide real guidance on when and what to buy, helping our clients make informed decisions that set them up for long-term success. Our goal is to make sure that every homebuyer we serve gets on the wealth-building ladder of homeownership with confidence.
We’ve learned that breaking industry conventions—like offering transparent pricing and digitizing much of the antiquated pen and paper focused mortgage process—can make a real difference.
How do I start building wealth?
In short, the Real Estate Wealth-Building Ladder is one of the most strategic ways to grow your financial future. By securing that first home, you’re unlocking doors to bigger opportunities—whether it’s upgrading to a larger property, funding your kids’ education, or even positioning yourself for early retirement. At Tomo Mortgage, we’re not just about offering competitive rates; we’re about helping you make moves that matter. With our transparent pricing and expert advice, we’re here to guide you through every step of the journey.
Ready to climb the ladder? Reach out today (737-510-2523) and let’s get you on the path to building real wealth through homeownership.
If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.
