New buyers accumulate approximately 29% of home sales in today's market, down from 40% of sales in past years. Although many first-timers have taken advantage of this unique market, some buyers are now finding that the rules have changed, altering buying habits and attitudes toward the home buying experience. Now is still a great time to buy, however, buyers should keep the following in mind when entering the house-hunting process.
Putting more money down is more important than ever. It's still possible to make a down payment of less than 5%, but it's smarter not to if you have the financial means. Insurance fees on government-insured mortgages are continually rising, having doubled in the last seven months. The difference in cash for a $300,000 mortgage could be as high as $30,000 without a healthy down payment.
Saving a substantial down payment may be challenging for first-time buyers, especially in larger city markets. If you're having trouble coming up with a feasible amount, look into various state offerings and other options (gifts from family or a co-owning agreement) that may be able to help you along the way.
Commit to staying for 10 years or more. The days of flipping homes are long behind us. Buying a house is now a long-term investment and living in your home for a decade or longer is definitely the way to go. In today's market, it may take buyers longer to recoup costs. By staying for a longer period of time, you're also allowing the market some time to further recover, while waiting for house values to increase as well. Serious buyers should be prepared to be in it for the long haul.
Be prepared to act fast and have plenty of competition. According to the National Association of REALTORS , about 32% of purchases were made in cash in the month of January. Competition from international buyers, investors and more, may give first-time buyers a run for their money…literally. What first-timer buyers can do: demand less. Though it is never recommended that you give up your right for a home inspection or appraisal, the less you demand (repairs, closing cost coverage, etc), the more enticing your offer will be to sellers, compared to offers that come with a large to-do list.
Buyers can still benefit from great interest rates and low prices, but it's important to be aware of what is happening in the market and adjust your buying strategies accordingly.
