A Boston-area couple in their early 30s realized how persistence counts when it comes to homebuying in a desirable market. After a year of searching in vain the pair -- an architect married to a marketing specialist -- snagged a fair deal on a 1,200-square-foot duplex that opened onto a fenced yard.
“They were highly motivated to leave their rented apartment and buy a place with outdoor space for their golden retriever. They could have given up, but instead (they) hung in there. That made a world of difference,” says Rich Rosa, the real estate broker representing the couple.
Rosa says many prospective first-time buyers become easily discouraged, especially if they’re targeting a neighborhood where inventory is so scarce that multiple bids remain common. Indeed, the Boston couple were outbid four times before they prevailed with their fifth offer. Had they given up, as many renters do, they would have missed out.
“What’s the moral of this story? You’ve got to play to win,” Rosa says.
Affordability remains a huge challenge for young adults wishing to escape their rental units. But the severe shortage of available homes is a still bigger issue, says Rosa, who heads an independent realty firm.
“In the past, lots of older people sold their big houses and downsized after retirement. But these days that’s much less true. A surprising number of boomers are hanging on. They want the space for family gatherings or for grandkids to stay overnight,” he says.
Of course, there are some neighborhoods where more listings have been popping up in recent months. But for the nation as a whole, inventory is expanding at an exceedingly slow pace, according to economists at Realtor.com, the home listing service.
Though some discouraged renters have abandoned their pursuit of a property, others are looking to the coming spring market when buying conditions could likely improve. Here are a few pointers for hopeful first-time buyers.
-- Find a mortgage lender who will work with you.
Real estate specialists always advise first-time buyers to determine their mortgage borrowing capability before heading out to look at property. That way they won’t get their hearts set on a property that’s unreachable for them.
“Getting a mortgage is very tough for first-time buyers. Especially if you’re self-employed or have imperfect credit, you practically have to walk on water to qualify for a home loan,” says Tom Early, an Ohio-based real estate broker.
He says buyers should make sure a lender takes them through a serious preapproval process.
“What you’re looking for is a lender who will verify your employment, income and assets, plus your credit history,” says Early, a former president of the National Association of Exclusive Buyer Agents (naeba.org).
He encourages first-timers to meet face-to-face with a lender and spend up to an hour at that meeting to ensure all their questions are answered. Soon after this meeting, the lender should issue a “preapproval letter” that spells out their full borrowing capacity.
-- Craft a household budget before touring homes.
Prior to granting you a preapproval letter, your lender will likely ask about your major obligations, like payments on your credit cards and car loans. But chances are the lender won’t ask about your other obligations -- such as a commitment you’ve made to a religious or charitable institution.
“When your lender sets your borrowing limits, he doesn’t see the full picture. That’s why I suggest you do a personal budget before deciding how much to spend on housing,” Early says.
First-time buyers should also take into account the money they’ll need to get their property into move-in condition.
“It doesn’t matter how wonderful a house you buy, the odds are you’ll want to make it more to your tastes,” Early says.
Also, make sure you factor in your carrying costs for homeownership -- such as your energy bills.
“Preapproval helps you define your top limit on financing. But that’s just the beginning. You have to decide for yourself how much you’re comfortable spending. These days, almost all buyers stay under their borrowing ceiling,” Early says.
-- Always consider resale before selecting a home.
No matter how long you intend to live in your first home, Early says it’s smart to choose property that should be easy to sell.
“Think about the back end of your transition. Remember that someday that house will be on the market again,” Early says.
Keeping in mind your budget constraints, what features make a house marketable?
“Nowadays, buyers want multiple bedrooms, for a home office or space to pursue a hobby ... If possible, try to get a house with three or four bedrooms,” Early says.
What other features should you look for?
“Ideally, you’ll want a place with at least two bathrooms, or a minimum of a bath and a half. Also, remember that many buyers are strongly attracted to a large family room with a fireplace,” Early says.
Even more important, you don’t want to trade off the most important feature for resale: a prized neighborhood location. Well-rated schools, prime shopping and good roadway access are all features that help define a popular neighborhood.
“Never compromise on location. Through the years, you’ll be vastly happier owning an asset in a strong neighborhood. Even in economic downturns, property in strong neighborhoods holds its value better,” Early says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)