Anyone that is considering a home purchase should certainly assess their financial situation prior to embarking on a strategy. Interestingly, a new study conducted by HarrisX on behalf of realtor.com showed that 47% of first-time home buyers found that their budget allowed them to afford a larger house than they thought they could afford. On the flip side, approximately 21% of respondents learned that their budget was less than originally thought.
Lower rates = more buying power
Particularly for first-time home buyers, the drop in the 30-year mortgage rate from 3.65% in March 2020 to a record-low of 2.65% in January 2021 has provided unexpected leverage. Lower rates have allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same, thus increasing their buying power.
For buyers, it is important to remember that the increased buying power is also benefiting other competing home buyers. In a super competitive market with such tight inventory as the current one, this will often lead to multiple offer situations. As a matter of fact, 20% of recent first-time home buyers reported being outbid on a home last year. In addition, 20% of these buyers made 5 or more offers before finally succeeding.
If you are considering “The American Dream” of home ownership this year, you may be closer than you realize. Half of recent first-time home buyers were able to save for a home in less than three years, mostly by setting aside a portion of their paycheck each month (50%), cutting out discretionary spending (33%), and saving lump sum money like tax refunds (32%). In addition, financial assistance from family or friends may also be an option for some buyers. 52% of Americans who bought their first home in 2020 said they got help with their down payment from friends or family. Not surprisingly, the number one lender in these scenarios were parents.
Are you a first-time home buyer in South Florida? At Live South Florida Realty, Inc. we have assisted many realize the dream of home ownership. Contact us today to develop a successful home buying strategy.