A recent study by the National Association of Realtors shows that first time homebuyers currently make up 32% of all home buyers. Compare this number to the historical average of 40%, this is the lowest percent since 1987.
Conversely, a survey by housing giant Fannie Mae found the majority of millennials consider owning a home more sensible then renting for financial and lifestyle reasons. Many young renters appear ready to buy and almost half of those surveyed said their next move will be to purchase a home.
So, where are these first-time homebuyers and what is holding this group back from buying a home?
The Fannie Mae survey gives the most popular reasons in order:
- Insufficient credit score/ history
- Affording down payment and closing costs
- Insufficient Income
- Too much debt
Let’s examine these major hurdles perceived by potential homebuyers and real strategies used by mortgage professionals every day to overcome these issues:
Insufficient Credit Scores / History
Most first time home buyers use FHA to finance their home, FHA is lenient on credit requirements and will allow credit scores below 600. A score of 620 or higher is more advantageous for a stronger approval and many of the first-time home buyer programs will require a 640-middle score for down payment assistance. There are also programs that will allow for home financing after significant events like bankruptcy, short sales and foreclosures, just expect to have larger down payment requirements and a higher interest rate.
Affording Down payment and Closing Costs
The HHF program (Florida Hardest Hit Program) provides up to $15,ooo in down payment and closing cost assistance for first time homebuyers in the Tampa Bay area, this amount will usually cover most if not all the expenses for first time home buyers. FHA currently requires a minimum of 3.5% down, VA loans have no down payment requirements.
Insufficient Income / Too much Debt
With the rent payments steadily rising in our area it is often more affordable to buy a home with today’s low interest rates and lock in your payment for the long term. Many programs will allow non-occupying co-borrowers for those whose debt to income ratios are too high.
For more information on any of the programs in this article please contact
Brian McMahon, Mortgage Loan Originator – Team, NMLS #327382
HomeBridge Financial Services, Inc.
5260 State Road 64 East
Bradenton, FL 34208
o: (941) 782-2092, Ext. 427 c: (941) 720-2573 f: (866) 215-2916