Rents are up, mortgage rates are down, and pandemic restrictions are easing. It’s no wonder that so many people across the region are looking to buy their first homes.
Fifty-six percent of people living in Delaware and the greater Philadelphia region are interested in buying a home this summer or fall, according to a recent WSFS Mortgage Regional Study of 1,007 area residents. The signs are especially positive for first-time homebuyers. Nearly two-thirds of those surveyed by WSFS who don’t own a home said they’re likely to buy within the next two years. And there’s more positive data. Sixty-nine percent of Gen Zers and 60 percent of younger Millennials agree that the region’s housing market is affordable, suggesting they may remain in the region.
If you have a steady income, the timing is right. Nationally, rents are rising three to four percent a year, according to the National Association of Realtors. By contrast, a mortgage provides a steady and affordable monthly payment. And here’s something else – the median net worth of homeowners is 46 percent higher than that of renters. Plus, interest rates are at historical lows.
The importance of your first home can’t be overstated. For most, it’s one of the most memorable events of their lives. For 68 percent of homeowners surveyed, the home they currently live in is the first one they purchased. Even a majority (53%) of Gen Xers are in their first homes.
For some, buying that first home is one of the most nerve-wracking experiences you will have. But with the right preparation and a good team behind you, it doesn’t have to be that way.
Here are some tips to help first timers get started.
Undergo a financial checkup
Take a complete and honest look at your finances to avoid over-extending yourself. Get a copy of your credit report and clean up any blemishes if possible. Your credit rating and history will go a long way in determining your monthly payment.
When determining what you can afford, decide on a budget you are comfortable with and don’t forget to add in the cost of taxes, homeowner’s insurance, utilities, etc. It is a good idea to have a healthy emergency fund – the cost of home ownership goes beyond your mortgage, so keep unexpected repairs or needed upgrades in mind.
Do your homework
Now’s the time to think about all the things that make a house a home – things like how many bedrooms and bathrooms you need, yard size and pet needs. You’ll want to scout neighborhoods – do you want to be near shopping and restaurants? If you have children, research the local schools. And if you commute, you’ll want to scout train stations, bus stops and rush hour driving routes. Think about whether you may need a home office given the changing working landscape and if you prefer a large yard for kids and pets to play in or one with little maintenance but just enough space for grilling and outdoor dining.
Build your team: The real estate agent
Eighty-six percent of those surveyed in the WSFS study expressed anxiousness about buying a home, with locating the right house at the right price one of the key reasons. The personal touch of a real estate agent can make all the difference.
Shop around to find an agent who is an expert in the market you’ve targeted, understands your specific needs and isn’t pushing you into a home you can’t afford. Your agent must also be able to navigate the way homes are sometimes being shown in virtual settings due to the pandemic. They should also be able to help you find local inspectors, share market trends and data and an overview of the neighborhood dynamics.
Build your team: The mortgage lender
A staggering 85 percent of those surveyed said they prefer a person to help guide them through the mortgage process, underscoring that finding a lender they can trust is just as important as selecting the right real estate agent. Younger buyers, who are likely to be first-time homebuyers, also prefer working with their regional bank to get a mortgage, with 73 percent of Gen Z and younger Millennials preferring a personalized experience and close geographic proximity to their lender over national or online options.
A lender will take the time to explain to you the various mortgage loan options, available government options, affordability, fees and processing costs, impact of the size of your down payment, closing costs and more.
Once you’ve selected your mortgage lender, the next step is to get pre-qualified to expedite any offers you make. Your lender also will help you collect the paperwork that’s needed to complete your purchase. This includes home inspection reports, loan approval documents, proof of homeowner’s insurance, down payment and income, and your contract with the seller.
It may sound daunting, but the right team will lead you step-by-step through the process so the only thing you need to worry about is moving in.
Helping you boost your financial intelligence.
Read our financial resources from your friends at WSFS.