First-Time Homebuyers
Last year millennials and first-time homebuyers were blamed for declining sales in all kinds of products ranging from cheese to canned tuna. Research suggests millennials want to buy homes and in fact, they are, but not at the rate of previous generations. Some of the reasons why millennials are holding off on buying a home include a lack of income, college debt; they’re not getting married and having children faster than previous generations. Their misconceptions have led many to think they can’t afford a mortgage.
“They are probably going to be our biggest segment of buyers over the next five years,” said Andrea Sheridan, realtor, and president of Kansas City Regional Association of Realtors.
In 2018, people 37 and younger made up the largest percentage of home buyers in the United States at 36 percent, according to data from the latest Buyer & Seller Generational Trends Report. However, that number is still about eight percentage points lower than that of the two previous generations when they were about the same age, a new report from the Urban Institute shows.
Molly Dean, a senior mortgage banker with Leader One, suggested first-time home buyers consult with a lender at the beginning of the process to come up with a plan.
For example, a common misconception is that you need 20 percent down to buy a home. Dean said there are ways around that thanks to ever-changing home loans and programs.
For first-time home buyers, we have tips for buying
Before house hunting, get pre-qualified – talking to different lenders and seeing not only who offers the best rates and terms, but also manageable fees and costs. Lender fees can vary quite a bit from one to the next. Pre-qualification gives you great information about how much house you can afford and allows you to move quickly if you find the right house.
Get pre-approval – Investopedia says, “A mortgage pre-qualification can be useful as an estimate of how much you can afford to spend on your home, but a pre-approval is much more valuable because it means the lender has checked your credit and verified your documentation to approve a specific loan amount (usually for a particular period, such as 90 days).
Get professional help – Find a realtor you can trust. You, certainly, have unprecedented internet access to sellers’ information, but a realtor has years of experience that can help you with everything from the neighborhood, the appraising of a dwelling, the paperwork, and the negotiating over price.
More Tips for First-Time Homebuyers
Always hire a general home inspector – Hiring a home inspector is recommended right after the offer-to-purchase contract is signed and prior to executing the final purchase and sales agreement. A part of the offering should be a clause that ensures that the purchase obligation is contingent upon the findings of a professional home inspection.
Beware of sleeper costs – Comparing the monthly mortgage payments to paying rent is only part of the story. The bank may require property taxes and insurance to be part of the monthly mortgage payment. Then there’s the unexpected. When a couple I know first moved into their house, the front, cement porch collapsed costing them $1.500 to repair.
Understand the need for Title Insurance. The seller produces and signs a warranty deed at the real-estate closing. It includes a full legal description of the property and pledges that the seller owns clear title to the property changing hands. The warranty deed also guarantees that the property is free of all liens and encumbrances. Title insurance can further strengthen warranty deeds which compensate the property owner in case of any third-party claim on the property.
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