I recently read yet another article on not only the rising house of homes for sale but also the crazy cost of rent. Gen Z and Millennials are spending well over the recommended 30% of their income on rent. Often they are paying more than 50% of their income renting basic and small spaces even with roommates.

As my son Ethan, who is attending UGA in the fall, looked for a place to rent here in Athens, what he found were very mediocre spots costing well over $700 a month per person. And, crazy as it seems, in Athens if you don’t secure your lease for August in JANUARY you have very few places to chose from. Even with low housing inventory, there are more homes to buy than to rent. That lead Ethan and me to consider him actually buying a home instead of renting. Could it be cheaper to buy than to rent even with higher interest rates? Can a 20 year old even buy a home?

For the last two years, Ethan has gone to UNG and worked part time at Seabear. He had managed to save more than enough money for a downpayment on a home since you only need 3% ($6000 on a $200,000 home). His credit score was 800, phenomenal at any age and kind of unbelievable for a 20 year old. The only thing that would keep him from buying a home was his debt to income ratio. Unfortunately, a roommate’s contribution can’t be considered income when you are buying a home. Even though Ethan has no other debt, with what he makes working part time, the house payment would be more than the max 43% allowed on government loans. I was willing to cosign on the loan, using my income to balance the debt to income ratio.* Even if he ended up paying a little more than rent each month, part of each payment would be building equity in the house. If we found him somewhere that he could improve, he would be adding sweat equity as well. And, if home prices continue to rise, even at historically normal rates of around 5% instead of the insane 20% appreciation we have seen, Ethan would have that first step on the property ladder.

One other thing we thought through and considered very seriously: what do we do if Ethan wants to go to grad school somewhere else? What if he wants to pursue a dream job in another city when he graduates? Is he being tied down by buying a home? We knew we had to help him buy a home that would appreciate in value if he wanted to move and/or be very rentable if he wanted to hold on to it. He also had to be willing to deal with repairs and unexpected expenses that happen as a home owner.

Weighing everything including the responsibility of owning your home, Ethan felt like it was worth it. We poured over his budget and he could comfortably afford the right home. We got pre-approval for a loan and were ready to find him a home. Up next - playing House Hunters to see which house Ethan choose and why!

*I did not cosign the loan without considerable thought. Cosigning means you take on all the liability if the person you cosign for defaults. I have great trust in Ethan (how many other 20 year olds have saved 1000’s of dollars and have an 800 credit score?) that he is going to pay and if something unforeseen happens there are several options such as selling, renting to others, or covering part of the cost for a short time.

The Crazy Cost of Rent