Big News for Aspiring Homeowners

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Published Date 7/28/2017

The real estate market is better than you think—a lot better. According to a recent Pew Research study, the percentage of renter households is the highest it has been since 1965—and 72% of those renters say they’d like to buy their home “at some point.”

According to Pew’s analysis of Census Bureau data, the number of renter households has increased to 36.6% from 31.3% since 2006. Total households increased by 7.6 million over the same period. Millennials—those coming of age in the early 2000s—are renting their homes at a higher rate: 65% of them, compared to 57% in 2006. Although home ownership is still viewed as being highly desirable, only 32% are renters by choice. Others rent their homes because of “financial circumstances.”

What are we to make of these statistics? One is that the pool of home buyers, especially first-time buyers, is higher than ever before. Most of those renting their homes still aspire to owning—eventually. We also know that most would-be home buyers still believe that home ownership is more difficult than it really is. Recent surveys have shown that most young adults believe that a 20% down payment is “standard,” and that lenders require a near-perfect credit history.

Neither of these is true, of course, and that presents an opportunity for enterprising loan originators and real estate agents. Now is the time to reach those potential home buyers with education and encouragement. Let them know that the “standard 20% down payment” is a fiction; every state offers some form of financial assistance in the form of low-cost loans, grants, tax credits, or some combination of the three. A quick search on the term, “Home buyer assistance by state” will turn up some useful articles.

Lenders are also more forgiving of less-than-perfect credit than most believe. Conventional loans require a minimum 620 credit score, while government-insured FHA loans allow 580. A credit score is no guarantee of approval, of course; only the lender can make that determination after reviewing a full application. Some loan programs may have higher credit requirements, but the real message here is that no one should be discouraged from applying just because they think their score doesn’t measure up to lenders’ standards.

For most, the obstacles are cash for down payment and closing costs. Even with the availability of loans calling for very small down payments, closing costs (title, escrow, document preparation and deposits for taxes and insurance) can often amount to more than the down payment itself. Many states offer low-interest loans to help with both these categories. Some of these are “sleeping loans,” meaning that the buyer won’t have to make any payments on them until they pay off the first mortgage.

Many of the renting households who aspire to home ownership are “boomerang buyers:” They were caught up in the crisis of 2008 and lost their homes to foreclosure or short sales. Although they may have given up hope of ever owning a home again, there is good news for them, as well. A “first-time home buyer” is someone who has not owned their primary residence for at least three years, so many of these people are now eligible for these assistance programs. The damage a foreclosure did on their credit will have largely healed by now.

Helping someone own their own home is some of the most meaningful and personally rewarding work any real estate professional can perform.

Source: tbws

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