Homeownership

The word "mortgage" comes from medieval French, meaning "death contract"—but the modern American mortgage has a more recent and complicated history. This explainer looks at how mortgages evolved from exclusive agreements for the wealthy into a key part of homeownership today, including the impacts of New Deal policies, redlining, and the Fair Housing Act.

Historically, experts have recommended buyers put down 20% on a house when buying. But due to rising housing costs and the cost of living, this goal is unattainable for many buyers.

According to data from 2022, 50% of homeowners felt their home was a better investment than stocks. The financial benefits of homeownership are significant: From avoiding rising rents to tax advantages, this interactive article outlines several.

Before the Industrial Revolution, early mortgages were rather exclusive loans given only to nobility. But as more people gained more wealth through the Industrial Revolution, banks began to take on “higher-risk” loans to everyday people.

This map of the US shows the annual income required to purchase a typical three-bedroom home in each state. This is based on a 10% down payment, a 6.65% interest rate on a 30-year fixed mortgage, and a 30% income-to-housing cost threshold, including taxes and insurance, according to recent data from Realtor.com. According to the data, Hawaii is the state where you'd need the highest yearly income.

Experts say homeowners should consider the home’s age and condition, and its location’s climate, when deciding exactly how much to put aside for repairs and maintenance. They also recommend setting aside more money for those who expect to hire others for home repairs rather than doing it themselves.

In 2004, the US homeownership rate was 69%. When the bubble popped in 2007, due to a variety of factors (including the prevalence of subprime mortgages) the Great Recession began. Foreclosures increased, as did the ratio of renters to homeowners. In 2016, the homeownership rate was at roughly 63.4%.

In 2022, the median wealth gap between homeowners and renters was closer to $390K—a significant divide. Over the past three decades or so, the median wealth gap between homeowners and renters increased by 70%, while the average wealth gap increased by more than 250%.

A deed differs from a title, which is the actual right of ownership to a property, and a concept rather than a physical document. These days, many deeds are online rather than physical pieces of paper kept in a home.

The New York Times built a continuously updated financial calculator to help potential homebuyers figure out which makes more sense given their individual situation: buying or renting a home. It takes into account how long someone plans to own the home for, mortgage rates, and more.