An agent’s guide to calming first-time homebuyers

Buying a home for the first time can be daunting, especially with how the market has been over the past few years. Rising interest rates and softening prices can create even more doubt for first-time homebuyers.

This doesn’t mean purchasing a home is a bad idea, but as an agent, you will want to be prepared on how to calm buyers, especially first-time buyers that may have more angst about the whole process than someone who has been through it before. 

With first-time buyers making up about 34% of homebuyers in 2022, according to the 2022 Home Buyers and Sellers Generational Trends Report, it’s important to know how to work with first-time buyers and help them with their concerns. There have been added worries to address recently with the market experiencing a rise in mortgage rates, homes doubling in value, and lots of competition and now frequent price reductions, giving first-time homebuyers extra jitters about purchasing their dream home. 

First-time homebuyers biggest fears

High mortgage rates and a softening market are definitely the biggest concern on homebuyers’ minds right now. This coupled with increased home prices has first-time homebuyers second-guessing taking the plunge. According to the National Association of Realtors, the average U.S home price reached $350,000 in January 2022 and 65% of buyers are saying that this is too high. 

In addition to rising rates, first-time homebuyers have the normal fears of purchasing the right property, knowing what they can afford, knowing what lender to pick, and putting down a large chunk of change for the first time. Being able to address these concerns will make the difference in a home sale, but also a homebuyer continuing with you as a realtor over someone else. 

How can agents help calm first-time homebuyers’ concerns during this crazy market?

Real estate agents need to help first-time buyers see that those concerns are normal and part of the process. Just like when an agents is getting started, there are lots of questions and concerns from the unknown. Let’s take a look at these concerns and how you can help calm a first-time buyer that has them.

To start, let’s address high mortgage rates. What first-time homebuyers do not realize is that if you have a lower credit score, the interest rate on your mortgage loan is going to be higher. Let’s use an example. If someone had a credit score of 700 to 719 with 20% of the mortgage price to pay upfront, the average rate on a 30-year fixed-rate mortgage on May 19 was 5.833%, according to Bankrate. On the other hand, if someone had a credit score of 660 to 679 with the same 20% upfront, the average mortgage interest rate was 6.66%. If that same person had a credit score of 800 or above, he or she would have most likely been able to secure a mortgage interest rate of around 5.5%. In essence, a person could pay more in points as opposed to interest rates.

Helping a buyer that is not sure what they can afford is simple – have them ask their lender for pre-approval. This will help them understand the most affordable price range to begin the house hunt. Don’t forget to let your buyer know this also helps shorten the closing process, which sellers will appreciate. 

This leads us to buyers that are in need of a lender, but don’t know how to find one. You can start by referring a buyer to your preferred lender if you have one, but it is also important to help them understand what to look for in a lender if they would like to vet a few themselves. They want a lender that will offer a lower interest rate and has a dedicated person for them to work with to make the process smoother. A dedicated person also helps when it comes to getting all of the labor intensive paperwork together to get a home loan. One tip I always recommend is asking the lender to give me a timeline on how long it will take them to close assuming the buyer delivers all items on time.  

For those buyers scared to put down that large of an amount of money – they don’t necessarily have to. First-time homebuyers have a few loan options open to them – FHA, USDA loans, VA loans. FHA (Federal Housing Administration) offers loans with as little as 3%  of the total cost of the home for the down payment. If a buyer wants to purchase in a rural area, they could look at a USDA loan. VA loans are an option for veterans, an active service member, or a spouse of a veteran.

Many first-time buyers, as well as repeat buyers, are afraid of not picking the right property. What if a better option will come up after I close? What if I am missing a good property in my search? Have I expanded my search enough? These questions and more are swirling through buyers’ heads during the house hunt. The truth is we just don’t know, and these questions will never go away even if they wait a while longer to see what else comes on the market. Help them by making a checklist of must haves for their home. If the home checks all or most of the boxes this will help them gain perspective. Reminding them that the best time to plant a tree is today. 

Conclusion

Buying a home for the first time is not an easy process–especially in this shifting real estate market. Understanding what fears often plague first-time buyers can get you fully prepared  and help take away as much pressure and anxiety as you can for homebuyers. As the market and economy change there will be new concerns added, and some taken away so make sure to stay up to date on your housing market.  

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