First time homebuyers play a significant role in the housing market and economy. According to the National Association of Realtors 2018 Profile of Home Buyers and Sellers, first time homebuyers represented 33 percent of home purchases last year. Although their impact has decreased since the first time homebuyer credit was discontinued, first timers continue to drive home sales.
Karan Kaul, of the Urban Institute, described how first time homebuyers recently surpassed repeat buyers in home purchases (First-time homebuyers will continue to dominate the mortgage market; urban.org; August 14, 2018). Kaul pointed out that although first time homebuyers have been facing headwinds, their impact on the housing market has increased. It’s no secret that first time homebuyers have higher student loan debt than other buyers and experience increasing rents, making it difficult to save for a down payment. Low home sale inventory along with increasing home sale prices and mortgage interest rates make it challenging to buy a home. However, despite the financial hurdles, first time home purchases significantly exceeded repeat buyers in 2017.
Market conditions are getting better for first time homebuyers. Lawrence Yun, NAR Chief Economist, pointed out that existing home sale inventory has been slowly increasing. The expanding number of available homes for sale will likely stimulate interest from frustrated previous would-be buyers to re-enter the home buying arena.
Another indicator the market is getting better for first time homebuyers is Freddie Mac’s Feb.14 statement indicating that mortgage rates are the lowest in twelve months (freddiemac.com). Freddie Mac economists believe that lower mortgage rates combined with a strong job market will reawaken demand in the spring housing market.
If you’re a first time homebuyer, this spring could be a terrific opportunity to buy a home! And although it’s a very exciting time, the process can sometimes feel like an emotional rollercoaster. So, make sure you make a home buying plan and stick to it. Take note of the following first time homebuyer hacks.
Hire a realtor. It’s very easy in today’s digital driven home search to go visit homes on your own. But the reality is that the agents you serendipitously encounter do not represent you. And anything you tell them can be used to the seller’s benefit. Take the necessary steps to find a realtor you trust and with whom you are comfortable.
Get prequalified before you begin visiting homes. Getting prequalified will allow you to understand how much home you can afford. When looking for a mortgage lender, don’t just compare rates. Finding an honest and accessible loan officer can help you facilitate your purchase when there are bumps in the road.
Create a housing budget. Financial experts warn about borrowing the maximum pre-qualification amount to buy your new home. Make a budget considering your income, debts and other financial obligations. Don’t forget to include your hobbies and indulgences. Your housing budget should not only be the mortgage payment (which is typically principal, interest, taxes and insurance). It should also include any HOA or condo fee, utilities and a maintenance budget. Keep in mind that some of these costs will likely increase.
Don’t opt-out of a home inspection. Don’t be pressured to forego the inspection under the guise of making your offer look better. Besides possibly revealing issues in the home, the home inspection is an opportunity to learn about the overall condition and maintenance of the home.
Dan Krell is a Realtor® with RE/MAX Success in Potomac, MD. You can access more information at DanKrell.com