How to still be a first time buyer

In 2022, the proportion of first-time homebuyers hit its lowest point in 41 years. Aspiring first-time buyers can enhance their chances of success by obtaining mortgage pre-approval and maintaining flexibility regarding the closing date when negotiating with sellers. Initiating a competitive offer from the outset can also contribute to a successful home purchase.

Despite mortgage rates being less burdensome in 2022 compared to 2023, the year proved challenging for homebuyers. Inflation surged, making it difficult for buyers to accumulate sufficient funds for down payments. Additionally, the scarcity of housing inventory and the prevalence of bidding wars persisted, particularly in the earlier part of the year when mortgage rates remained competitive.

It comes as no surprise that only 26% of home purchases in 2022 were made by first-time buyers, marking the lowest percentage since 1981. Historically, the average annual percentage of home purchases by first-time buyers stands at 38%.

While the housing market has cooled somewhat since 2022, entry for first-time buyers remains demanding. Unlike existing homeowners with substantial home equity, first-time buyers lack similar financial leeway. Nevertheless, there are strategic steps that first-time buyers can take to gain a competitive edge.

  1. Obtain mortgage pre-approval: Having a pre-approval letter during your home search signals to sellers that a mortgage lender has scrutinized your finances, indicating a strong position to purchase a home. Sellers prefer buyers with pre-approval, as it reduces the risk of a deal falling through due to an inability to secure financing.
  2. Demonstrate flexibility with the closing date: First-time buyers, not burdened by the simultaneous sale of another property, possess greater flexibility in choosing a move-in date. Aligning with the seller's preferred timeline, even if it means waiting longer, can enhance the appeal of your offer.
  3. Present a competitive initial offer: Given the current mortgage rate environment, extravagant offers significantly above the asking price are less common. However, due to limited inventory, bidding wars persist. To circumvent this, consider making a strong initial offer. Offering a higher price upfront may prompt the seller to accept without waiting for potentially better offers, potentially resulting in a lower overall purchase price.

While navigating the challenges of first-time homebuying remains daunting, implementing these strategies can provide a valuable advantage in a persistently competitive market.

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