Numbers Count: First-time buyers return
Numbers count. They matter to bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.The numbers: Jump in existing-home sales
Existing-home sales rose in May to their highest pace in nearly six years, largely attributed to a rise in the number of first-time home buyers, according to the National Association of REALTORS?’ (NAR) latest housing report, released June 22. Existing-home sales climbed 5.1% in May to an annual rate of 5.35 million. Sales are 9.2% above last year at this time. The market share of first-time home buyers rose to 32% of transactions in May. A year ago, first-time buyers represented 27%, according to NAR.
“The return of first-time buyers in May is an encouraging sign,” said Lawrence Yun, NAR’s chief economist. “More first-time buyers are expected to enter the market in coming months, but the overall share climbing higher will depend on how fast rates and prices rise.”What counts: Here are 3 dos and a don’t for first-time homebuyers:
* Get pre-approved for a mortgage. Having a pre-approval letter from a lender reassures a seller that you are serious about buying a home, that you have funds for the down payment and that you have a lender prepared to provide a mortgage for the property you are interested in.
* Prepare for closing costs. Make sure you know how much cash down you will need at the closing of your loan, which is when you sign all your loan documents. This is one of the potential surprises for many first-time buyers — the need for several thousand dollars to cover closing costs such as the property appraisal, loan processing, title insurance, and title inspection and recording fees.
* Prepare a budget. Know what you’re getting into. That means preparing a budget of costs of homeownership, including property taxes, insurance, maintenance, and potential homeowners association (HOA) fees if, for example, you’re buying a condo. Ask yourself, will you have to buy appliances? Or do any repairs? Settling into your first home will probably be more enjoyable — and less stressful — if you’ve estimated the costs of ownership.
* Don’t rack up fresh debt. Before you sign your loan documents, your lender will take a look at your credit report a final time to make sure you didn’t buy a tricked-out Tesla on credit in the past month. Additional debt, and the associated monthly payments, may complicate your loan approval or closing. So while you’re in the midst of closing on your first home, you may want to do all you can to avoid additional debt.