Numbers Count: First-time buyers make a comeback

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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.

Young woman seated at table next to the window as she looks out at a very green, tree-filled scene.The numbers: First-time buyers made up 32% of all buyers of existing homes in August, an increase from 28% in July, according to the National Association of Realtors latest home sales report released September 22. A year ago, first-time buyers comprised 29% of all buyers. Meanwhile, the Realtors’ report found that after several months of increases, existing-home sales dropped in August.

What counts: One in every three buyers in August was a first-timer. Despite what we read about home affordability, first-time buyers are managing to come up with a cash down payment, they are qualifying for mortgages, and they are finding desirable and affordable homes.

If you are in the market or considering getting into the market for a first home, here are four tips on how to get started:

1. Get preapproved for a mortgage. A preapproval is pretty solid evidence of what you can afford. By presenting a preapproval letter with an offer on a home, you are indicating to the seller that you are serious about buying a home, that you have funds for the cash down payment, and that you have a lender willing (pending a final credit decision of course) to provide a mortgage for the home you are interested in.

2. Get familiar with new forms. In October, homebuyers will start receiving 2 new, simplified disclosure forms when applying for a loan and at closing: a Loan Estimate (LE) at the start of the loan application process and the Closing Disclosure (CD) at the end of the process. These are a big step forward to help homebuyers see all their borrowing costs: the monthly payment, the long-term borrowing costs, the detailed costs for a particular mortgage, and the total cash needed when signing for a mortgage. You can also find more information on these forms on the Consumer Financial Protection Bureau’s website.

3. Prepare for closing costs. Know how much cash down you will need at the closing of your loan, and be prepared to set that money aside. You may need several thousand dollars to cover closing costs, such as the property appraisal, loan processing, title insurance, and title inspection and recording fees.

4. Prepare a budget. Making a budget — including closing costs for a mortgage, property taxes, insurance, maintenance, and utilities — may help ensure you don?t overextend yourself on a home. Keep in mind, too, that you may have added costs of moving in, such as buying appliances or taking care of potential repairs. Also, take into account potential changes in commuting costs if your new home is farther or closer to work. Here is an online commute cost calculator from UC-Merced to help you estimate commute costs.

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