First-Time Homebuyers: YES YOU CAN Buy a Home in This Market
Lack of inventory and massive year-over-year gains in the price of entry-level homes are not the only factors preventing prospective first-time homebuyers into taking the leap towards homeownership. According to NAR’s 2017 Profile of Home Buyers and Sellers Speak report, first-time homebuyers are struggling to afford the costs that come with purchasing a home. In fact, 1 in 3 first-time homebuyers are taking two or more years to save up enough money for a down payment. Some are desperate enough to have reportedly pulled money from retirement funds or their 401k. With student loans, credit card debt, and careers that are just beginning, first-time homebuyers simply can’t afford a 20 percent down payment. Homeownership can be pricey and costs continue to stack up with movers, closing costs, inspections, and so on. First-time homebuyers often overlook other fees and costs that come with purchasing a home. A competitive market and the daunting amount of savings a first-time homebuyer needs to purchase a home has discouraged many from taking the leap into homeownership, and has resulted in a historical low for homeownership.
While lack of inventory is a challenge, first-time homebuyers currently have ideal conditions for purchasing a home. These conditions include low down payments for certain loans, such as those offered by the Federal Housing Authority, down payment assistant programs, looser lending standards, and interest rates that remain historically low. Many people considering homeownership feel stuck in neutral as rent increases and they are battling paying off student loans leaving them unable to save money. However, there are opportunities for those stuck in neutral to become homebuyers. Many first-time homebuyers are pushing to save 20 percent and are not utilizing available down payment assistant programs.
Eagle Home Mortgage, a subsidiary of Lennar Corporation, now offers a mortgage program that helps borrowers pay off up to $13,000 of outstanding student loans. Eagle Home Mortgage will direct 3% of the purchase price to pay the borrower’s student loans when they purchase a new home through Lennar, one of the nation’s largest homebuilders. Other programs like CHFA offer a down payment assistance grant. Specific counties throughout Colorado offer programs to assist first-time homebuyers. For instance, Adams County has a Housing Authority program that offers down payment and closing cost assistance(HCHA). The City of Aurora also has a Home Ownership Assistance Program that offers up to $10k for down payment and closing costs (HOAP). To search for down payment and closing costs programs that fit your needs click HERE.
This year, the Colorado Association of REALTORS and Colorado representatives rallied to pass legislation that allow for First-Time Homebuyer Savings Accounts. A First‐time Homebuyer Savings Account allows any Coloradan to set aside up to $50,000 toward the costs of closing on a new home. The earnings on those funds — interest and capital gains — are free from Colorado state taxes forever. For more information on FHSA’s and how to open one, click HERE .
First-time homebuyers do need to consider the current housing market and what that means for their house searching journey. First step in this process is to find a qualified REALTOR to help you navigate a complicated process. A knowledgeable expert will help you prepare the best deal and avoid delays and mistakes, help you find the best properties available, and have the negotiating skills to advise you as to what is recommended or required. Due to the low inventory, first-time homebuyers should be aware that they will need a bit of patience in Colorado’s competitive market. Buyers who have a larger down payment will sometimes be considered by the seller over buyers who have a lower down payment. According to Zillow, this means that buyers with lower down payments make more offers on homes than buyers with a higher down payment. First-time homebuyers with lower down payments will spend longer searching for a home and will experience losing out – but don’t be discouraged! Time and patience will pay off with the purchase of your first home.
It’s a great time to buy for first-time homebuyers. Don’t place your dreams on hold due to the struggle to save enough money. There are programs available that offer down payment and closing cost assistance. Becoming a homeowner is possible if you find the right REALTOR to help you navigate the market, utilize the programs available, and remain positive and patient through the process of finding your home.
Sources: Down Payment Resource, Zillow, the National Association of REALTORS, Colorado Association of REALTORS.