Smart Moves

Tips for First-Time Buyers

After the financial crisis, homes were on the market at a deep discount, and potential buyers were scared property values would drop further. Now the situation has flipped, and starter home buyers fret that escalating prices mean they’ll never obtain a home.

“Housing inventories are still tight as a drum in the starter-home segment,” says Sid Davis, a veteran real estate broker and author of “A Survival Guide for Buying a Home.”

Will 2018 prove a more favorable time for first-timers? Will inventories swell? Will mortgage rates ascend from their near-historic lows? As Davis underscores, no economist can predict the future with certainty. That’s why he and many other real estate specialists urge would-be buyers not to postpone their quest for homeownership.

Svenja Gudell, chief economist for Zillow, which tracks real estate markets throughout the country, says saving for a down payment is a moving target for novice buyers in many communities.

“Sky-high rents and rising home prices are putting first-time buyers in a bit of a catch-22,” Gudell says.

In many metro areas, it now costs nearly as much to rent an apartment as to buy a reasonably sized condo, townhouse or detached property. That’s increased incentives for homeownership, despite the intense competition over scarce listings.

Real estate specialists say a well-planned approach to homeownership helps calm the anxieties of many novices. Here are a few common buyer fears and how to surmount them:

-- Fear of exposing your credit history to a mortgage lender.

Davis says many would-be homeowners worry how their credit histories will be viewed by mortgage lenders. But he says most such anxieties are usually baseless, even during the present period, when lending standards remain stringent.

Mortgage pre-approval -- which lets buyers assess their borrowing capability before they head out to shop for a property -- is now easily obtained over the phone. Even so, Davis says some first-timers prefer to go to the lender’s office for pre-approval.

Also, to ensure they’re being quoted a competitive rate for their mortgage, he encourages all buyers to shop lenders before submitting a formal loan application.

“One superb way to find a good mortgage is to go to a small community bank or a credit union. They might give you a better deal than a large bank,” Davis says.

-- Worry that your family will judge your home choice harshly.

On financial matters, many young first-time homebuyers still look to parents for guidance. But sometimes, the involvement of elders can backfire.

“It’s not unusual for the intervention of parents to blow up a deal for their kids,” Davis says.

There’s nothing inherently wrong with seeking help from your parents. But he says it’s wise to involve them early on -- not after you’ve picked out the property and are about to seal the purchase.

“(Parents) tend to highlight the shortcomings of a property the kids like. And this can scotch a deal,” Davis says.

If you’re afraid to go forward without your parents’ help, he suggests you bring them along on your initial house-hunting trips. That way they can compare various alternatives and will likely give you more objective advice.

But Davis cautions young buyers against giving parents a veto over their final property selection, even if they’re helping fund the down payment.

“One approach is to involve parents in your early home shopping trips but then gracefully preclude them from the final decision making-process,” he says.

-- Fear of making a huge error.

Davis says many wannabe homebuyers become risk averse -- worrying they’ll select the wrong property. And such fears are understandable in the aftermath of the housing crisis.

“New buyers often feel they’re walking through a swamp of unknowns. But a lot of their anxieties are needless,” Davis says.

He says it’s not uncommon for young buyers seeking emotional safety to keep researching the market rather than make a decision. But in areas where sellers have the upper hand, buyers can forfeit the chance to buy a home they love simply by obsessing too long over the details.

Davis says the best remedy for home-selection anxiety is solid information. Work with an agent who can accurately advise on the true market value of any property you’re considering, thereby reducing your chances of overpaying.

“It’s a good thing for young buyers to get a lot of hand-holding from a reputable agent, ideally one who enjoys helping first-timers,” Davis says.

-- Fear of lacking enough funds to reach the finish line.

Of course, it can be costly to make a housing change at any stage of your life. But Davis says many longtime renters overestimate how much cash they need to become owners.

Granted, low-down-payment conventional mortgages remain harder to obtain than they were before the last recession. But buyers can still get into a first property for little or no down through programs offered by the Department of Veterans Affairs (va.gov) or the Federal Housing Administration (hud.gov). Also, many state and local governments continue to provide first-time buyer assistance programs.

“Finding a really sharp Sherpa from the mortgage field can help you climb into homeownership,” Davis says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

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