5 advantages you may have as a first-time home buyer

Is it finally your time to buy a new home in the Triangle? If you’re considering making a first-time purchase on a home, Thomas Eller, Vice President of North State Bank, says you may be in a great position to buy a home.

Purchasing a home is a long-term investment that can help you build wealth. In the current Triangle market, where home values will continue to rise for the foreseeable future, it’s a smart investment to buy a home anywhere in the greater Raleigh-Durham area. While it’s been tough for many buyers in the past few years, Eller says the market has begun making shifts that are making it even easier for many first-time buyers.

“My message to first time home buyers is that it doesn’t matter your walk of life, it doesn’t matter your capability. Right now is a better time than I’ve seen, even before Covid,” he said.

There are many specialized programs that are designed specifically for first-time buyers to get into a home. Consider the following five factors, which may give you distinct advantages if you’re looking to purchase your first home.

While the COVID-19 pandemic caused a massive real estate boom across Raleigh-Durham, Eller said there was difficulty for potential homebuyers. “Even before Covid, rates were relatively low, demand was high in our market, and there was still enough demand where, for some homebuyers, it was very tough to get a deal,” he said.

That is no longer the case today.

“We’ve had more success the past four months putting first-time home buyers in their first homes because they had good situations,” he explained. “They didn’t have a ton of money, but their offers won the deal because there was nobody else offering. Now that things have slowed down, though rates are higher, this is the best time I’ve seen in over five years for a first-time home buyer to throw out an offer and for it to get accepted.”

Eller said he’s been able to finance homes for people who were unable to purchase during COVID-19. His advice is straightforward: “There is no time like the present to put an offer out, because this is the best time in five years I’ve seen where a first-time buyer actually has a greater chance to get a home.”

He encourages potential buyers to be prepared and to work closely with a trusted, local lender for the best access to knowledge and expertise. Most importantly, be prepared with a budget in mind.

“I always tell every customer, we don’t want you signing up for a deal that is going to financially cripple you,” he said. “It’s a good thing for a customer to look at their budget. But understand that this payment is not forever.”

In fact, he explained that often, payment issues take care of themselves. “Since mortgages were created in the 1920s, the average lifespan of a mortgage is just 7 years. That means in 7 years, the home is either sold, refinanced, or paid off to zero,” he said. In other words, circumstances will likely change in a few short years. ”If they can afford to make the payment, but they just don’t like the payment, you’re not married to this rate forever. If rates drop the next day, you can refinance.”

Because first-time buyers are renters and they haven’t been building equity, saving down payment money can be a difficult task. Fortunately, some programs allow buyers to put as little as 3 to 3.5 percent down on a home. For a $300,000 home in the Triangle, you may only need to save up $9,000 before you can buy.

In addition, zero down payments do exist, but they are typically reserved for specific groups, like veterans and rural buyers. Talk to your lender to determine whether you qualify for these types of loans and to seek advice on getting over the threshold if you’re not quite there.

First time buyers typically qualify for government backed loans and other types of loans that allow for smaller down payments. And they can reduce the stress involved with this type of purchase. These loans including the following:

·   FHA loans – Insured by the Federal Housing Administration, these loans require 3.5 percent down borrowers, and Eller recommends a credit score of 620 and above.

·  VA loans – If you’re a current service member or former member of the military, or a spouse, the VA loan is a great option. This mortgage is guaranteed by the U.S. Department of Veterans Affairs. It requires no money down, and credit score varies by the lender.

·  USDA loans – The USDA loan, issued by the United States Department of Agriculture’s loan program, requires no money down and low interest rates in rural and suburban communities that qualify.

·  Fannie Mae and Freddie Mac conventional loans – Fannie Mae and Freddie Mac loans allow buyers to make purchases with a smaller down payment, but you’ll likely pay private mortgage insurance (PMI) unless you put 20 percent down.

Eller said he works closely with potential buyers to put them in the right mortgage program. “It is up to their own circumstance,” he said. “Every different product is different. What’s going to dictate that is the amount of money that they have, or lack thereof, their credit score, their income, and the geographic locations where they’re looking.” Your mortgage lender will make the right recommendation once they have a clear picture.

Unlike a conventional loan, which requires the standard 20 percent down, a low debt-to-income ratio, and a credit score above 620, government back loans allow for lower credit scores and a less substantial down payment.

Veterans and current service members can get a home for zero down and Eller said they should have a credit score starting at 620. FHA loans require 3.5 percent down but also recommend a credit score of 620 and above. Purchasing a home is possible for many first time buyers because banks are willing to overlook some credit snags with the help of private mortgage insurance, which protects the lender if you default on your loan.

The state of North Carolina and other entities have established programs to help first time buyers get into a home. The City of Raleigh has programs, the Homebuyer Assistance Program and the Enhanced Homebuyer Assistance Program, which provide funding to help cover closing costs and down payments.

The North Carolina Housing Finance Agency is another resource that helps provide solutions to first time buyers. The North Carolina Advantage Mortgage Program offers up to 3 percent of the loan amount, or $8,000 to assist in a down payment or closing costs on a home. And the NCHFA’s Community Partners Loan Pool provides qualified buyers with up to 25 percent of the sales price of a home, up to $50,000. 

Eller said qualifying for these programs may take work on a buyer’s part. “There’s a lot of front-end preparation,” he said. However, help is out there to help you realize your dream.

Homeownership may be more feasible than you first expected if you’re a first-time home buyer. Shop around to get the best mortgage rates and ask any questions you may have along the way. And be sure to talk to a lender you trust, such as Eller and North State Bank. Lenders know it’s a big purchase, and they’re here to make it as painless as possible.

The Jim Allen Group provides access to information on this blog/website as a public service for educational purposes only. Although reasonable efforts have been made to ensure that all of the information made available is current, accurate, and complete…[read more]