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 (nar.realtor), 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 February 14th 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. The home buying process can often be confusing and feel overwhelming. For this reason, getting appropriate guidance, advice and care should be top priority.
So, how do you take care of yourself as a first time homebuyer? Make a home buying plan and stick to it. Take note of the following first time homebuyer hacks:
Make Your First Time Homebuyer plan
- Hire a Realtor
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.
Regardless of where you find your buyer agent, some qualities you should look for include knowledge and experience. A knowledgeable and experienced agent can point out obvious issues in a home, can have knowledge of home buyer assistance programs, as well as maneuver through the new maze of buying a home. Having the right Realtor by your side can make all the pieces fall into place.
- Get Pre-Qualified by a Mortgage Lender
Get pre-qualified before you begin visiting homes. Getting pre-qualified 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.
Choosing a lender might seem as simple as looking on the internet. Don’t rely on mortgage interest rate teaser ads. They are meant to get you to call the lender. Check with banks and institutions with which you already have a relationship. Many home buyers, with whom I have had the pleasure to assist, either used their local bank, credit union, or already had a relationship with a loan officer from a local mortgage company. Whomever you chose, make sure they can deliver what they promise.
- Create a Housing Budget
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.
- Home Inspection
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.
- Understand your Home Warranty
A common misconception is that a home warranty will unconditionally cover any problem and replace non-working systems and appliances without cost to the home owner. The truth is that home warranties have limitations to the scope of their coverage and services as well as conditions under which a home owner may make a claim.
A home warranty is a service contract and in some cases the warranty acts like an insurance policy. Home warranty plans vary depending on the company offering the plan and level of coverage. Typical plans are renewable annually, however some companies offer multi year plans. Typical coverage may include appliances such as dishwashers, clothes washer and dryer. Some companies may offer coverage for furnaces, air conditioning, plumbing fixtures (such as hot water heater), and some electrical fixtures. Expanded coverage may cover hot tubs and pools (at an expanded price of course).
Original published at https://dankrell.com/blog/2019/02/26/first-time-homebuyer-essentials/
By Dan Krell. Copyright © 2019.
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.