Competition just got tougher especially in the entry level market. However, financial challenges seem to be hampering some buyers. According to Jonathan Smoke, the chief economist of realtor.com:
- The share of first-time buyers has jumped to 51%.
- 35% of buyers have just started to explore but are not ready yet to buy.
- 59% of buyers had been looking for less than three months.
As more people enter the market new challenges arise:
- Supply-demand imbalance drives up home prices.
- 9.4% of buyers report having difficulty qualifying for a mortgage.
- 19.5% of all buyers need to improve their credit scores
- 25% of buyers do not have enough for a down payment
Despite these challenges, the market has seen growth in part because of pent-up demand from very qualified buyers who were able to meet the challenging mortgage qualifications that are the norm these days.
If you are among those first-time buyers who are just starting to look, there are a few things that you can do now that will improve your chances of success in the future:
- Get your financial house in order. Know your FICO score, and work to get it above 700 to improve your ability to qualify and to get a better rate.
- Understand what you can afford to put down. The average down payment this year is 11% nationally, but it varies dramatically by market and by loan type. If you are struggling to come up with a down payment necessary for your market or type of mortgage, research down payment assistance programs.
- Get all of your financial records organized, including recent bank and financial statements, the past two years of income tax filings, and pay stubs.
- Record the details of any debts you may have, from revolving credit card balances to car payments and student loans. You will need all of this before you can work with a lender.
- Finally: Find a lender and get pre-approved. We still have very limited supply, so being pre-approved continues to be a key part of a successful buying strategy if you intend to finance a purchase with a mortgage. A pre-approval letter as part of an offer will communicate to the seller that you have the ability to close.
See the full article here: First-Time Home Buyers Come Out in Force—but Face New Challenges
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