First-Time Home Buyers: How to Compete in Today’s Market
Low inventory and an influx of home buyers has created a competitive housing market, especially for first-time buyers. Starter homes are feeling the inventory crunch, with Baby Boomers living in their larger homes longer, reducing available move-up options for Generation X, and thus starter homes for Millennials.
How can today’s first-time home buyer compete in an already competitive market?
Dig into Down Payment Assistance
The good news is, the 20% down payment is not ironclad. In fact, the National Association of Realtors (NAR) reported that in 2016, the median down payment for first-time home buyers was only 6% of the purchase price. But, a larger down payment can still make your offer more competitive. With over 2,500 down payment assistance programs nationwide, many home buyers, especially first-time home buyers, may qualify for some amount of down payment assistance. HomeFundItTM, by CMG Financial, is one way for home buyers to grow their down payment through crowdfunding with contributions from family, friends, and others in their personal network.
Go “Back to School”
Home buyer education and pre-purchase counseling helps first-time home buyers get familiar with the home buying process before they start shopping. Some home buyer education classes are available online and others take place in a classroom. Local and regional housing counseling agencies can help you find out what option is best for you and your schedule. In some cases, completing home buyer education or pre-purchase counseling can help you earn additional grants or assistance. For example, qualifying HomeFundIt users who complete home buyer education or pre-purchase counseling are eligible to have Closing Costs Covered through a grant opportunity.
Get Preapproved Before You Start Shopping
You might think that mortgage financing is the last leg of the home buying journey, but actually it should be the first step. Mortgage preapproval is critical to showing home sellers you are a serious contender for their home. Other advantages to mortgage preapproval include knowing your budget ahead of time, exploring loan options, and having an idea of how much your down payment should be. Plus, working with an established lender may help you connect with other real estate professionals, maybe even the listing agent on the home you would like to buy!
Know Your Area
A little research ahead of time will prepare you for what to expect down the road. Using home listing services like Zillow, Trulia, and Realtor.com can give you an idea of what prices look like in your area and refine your search based on your specific needs and wants. Working with a real estate agent will also help you find the perfect home, as they most likely get listing notifications before the listing is published publicly.
Buying a home is not an automated process. You have to be prepared to change plans along the way. Working with the right real estate team can help prevent unexpected surprises, but in today’s heated market many homes are selling in a matter of weeks. Timing is key. If your real estate agent needs to show you a home on a weekday, you may need to take time off work instead of waiting until the weekend. You may also have to choose what wants and needs are deal breakers. Many first-time home buyers are opting for fixer-uppers or homes in need of repair and remodel and using renovation financing to combine the cost of the mortgage and repair and still purchase a home within their budget.
Today’s market is competitive, but it’s not impossible for first-time home buyers to get an offer accepted. Transaction time is crucial. Being prepared before you start shopping is one way to ensure an efficient transaction.
Sources: Down Payment Resource, the New York Times