Smart Moves by Ellen James Martin

Tips For First-Time Buyers

The evidence is mounting: It’s increasingly tough for those in their 20s and 30s to climb onto the bottom rung of the homeownership ladder.

“It’s kind of a double-whammy for first-time homebuyers. Inventory of starter homes is very low and competition for homes is very high,” says Felipe Chacon, a housing economist for Trulia, which tracks markets throughout the country.

Indeed, Chacon’s research shows a severe “mismatch” between the demand for starter homes and available supply. A leading reason is that in recent years there’s been a dearth of entry-level home construction, especially in areas where millennials wish to live.

To address the affordability problem, one obvious strategy is to seek parental help. If your parents have the means, they could provide cash assistance for your down payment and closing costs. Also, assuming their income and credit is solid, they could co-sign for your mortgage.

Daren Blomquist, a senior vice president at Attom Data Solutions, a real estate data company, says that research shows that nearly a quarter of homebuyers now have “co-borrowers,” many of whom are parents.

Another approach is to compromise somewhat on your standards when selecting the right home to buy. Chacon says young purchasers can save as much as eight percent off the market value of a home if they’re willing to take one with some correctable defects. Indeed, he and his wife did well when they acquired a ranch-style place in Texas that needed a limited amount of work.

To outdo rival buyers, they were willing to address minor issues, such as faucet leaks, locks that needed replacement and clutter that needed clearing.

Chacon and his wife purchased the property with a 3.5 percent down Federal Housing Administration mortgage, which also made it more affordable. He encourages young purchasers to explore such a low-down-payment government-backed loan and says too few buyers are aware of this option.

Here are a few first-time buyers:

-- Restrict yourself to your financial “comfort zone.”

Merrill Ottwein, a real estate broker and former president of the National Association of Exclusive Buyer Agents, cautions buyers of all ages against taking any mortgage that feels uncomfortably large.

“It’s up to you to create a realistic budget and limit your loan amount,” Ottwein says.

“The good news is that today’s young buyers are mostly very conservative. During the Great Recession, they saw how easy it was to lose a home if you overspent,” he says.

-- Seek a property where you could house a roommate or two.

“For lots of young folks it’s a huge plus to have a roommate who pays rent and helps offset their mortgage expenses,” Ottwein says.

What kind of property is most attractive to renters?

Ottwein recommends you seek a home with a bedroom suite that includes a private bath so a roommate could live more autonomously. A separate, outside entrance to the suite would be ideal. Also, a place near a college campus could also be an especially good bet.

-- Look for an energy-efficient home.

After taking ownership, many first-time buyers are stunned at the size of their outlays for upkeep. They hadn’t expected to spend so much for everything from lawn fertilizer to plumbers’ bills. The scope of their energy costs also comes as an unpleasant surprise.

Obviously, many costs associated with homeownership, such as taxes and insurance, are unavoidable. But savvy home shoppers can more easily contain their energy costs by selecting an energy-efficient property that’s well insulated and has double-pane windows, says Sid Davis, a longtime real estate broker and author of “Your Eco-Friendly Home.”

He suggests that before agreeing to buy a particular property, you review at least six months’ worth of utility bills from the current owner. Also, make sure the home inspector you hire gives you a well-considered estimate of your utility costs going forward.

“The inspector should tell you about the quality of insulation in the property, and energy ratings for the windows. Double-pane windows can save you as much as 15 to 20 percent on your utility bills compared with single-pane windows,” Davis says.

-- Don’t forget to factor lifestyle into your home selection.

You needn’t live in the immediate vicinity of friends to stay close. But you could find life in a faraway suburb very lonely if the neighborhood where you move is a long drive from close friends.

“A great home purchase isn’t just about lots of square footage and lovely features. It’s also about finding the right location to support a lifestyle that’s fun and fulfilling,” Ottwein says.

(To contact Ellen James Martin, email her at