For First-Time Homebuyers, The New House Hunting Season is Now

Much has been discussed about rising mortgage rates impacting the homebuying market after the frenzy we experienced last year.

While today’s rates are certainly higher than they were the past couple years, it is important to remember that record-low rates aside, it continues to be a good time for a particular group of people wanting to purchase a new home—the first-time homebuyer.

If you are trying to buy a home for the first time in 2022, you likely didn’t experience the record low rates and ultra-competitive buying market with some homes receiving multiple bids above asking price.

The reality is that those low rates are not likely to come back anytime soon, and home values are stabilizing, so if you were seeking a home during that time and were priced out, now is a great time to jump back in.

Here are a few tips to get started.

Weigh Your Options
If you are currently renting, you’ve likely seen a significant rise in rent and many challenges in finding somewhere new to live that is affordable. This rental housing crunch has led to many people reconsidering whether renting makes sense for them or if buying a home is a better short- and-long term option.

This decision is different for everyone depending on their personal finances, current or desired location to rent or buy, and anticipated future earning power.

Know What You Can Afford
Take a deep dive into your finances before beginning your search. There are several factors to consider when determining your homebuying budget, including the type of loan. For first-time homebuyers, there are specialized government programs, such as FHA, that provide favorable terms for qualified buyers as well as lenders’ programs designed to assist with upfront costs while providing educational resources.

Some lenders also offer homebuying programs designed to help individuals and families of varying income levels find an affordable home through down payment and closing cost assistance.

When assessing what you can afford, remember to factor in monthly payment costs that can be overlooked, such as property taxes and homeowners’ insurance that are typically funneled to an escrow account, and if you are using a government program like FHA, mortgage insurance.

Rediscover Alternative Loans
Some types of mortgage loans, like adjustable-rate mortgages, or ARMs, can be an option for first-time homebuyers looking to mitigate the monthly costs of higher home values and interest rates.

ARMs offer a lower introductory, fixed interest rate that remains the same for a pre-determined amount of time, typically three to 10 years. After this fixed term, the rate changes in line with current rates at that time.

If you plan to sell your first home and buy a new one before the fixed term is over, or if you anticipate a rise in household income, an ARM may be a great option for you.

To help determine what mortgage and home options are best for you, have candid conversations with your lender and find a realtor that is also knowledgeable of your desired buying area as well as the various programs that are available for buyers looking for their first home.