Becoming a first-time homebuyer is an exciting time in anyone’s life. But sometimes it’s hard to tell where the excitement begins and the anxiety ends.
That’s because while the good energy pumping through one’s veins is directly attributed to making the investment of owning a home, racing right alongside it at breakneck speed is the uncertainty and stress that comes from the process.
And the mixture of all the feelings and emotions that are stirred when buying a home for the first-time is especially intoxicating for Millennials and younger first-time homebuyers.
Soaring prices, dwindling availability, and the burden of things such as exorbitant student loan debt or wages that aren’t commensurate with the prices of homes in hot markets combined with unexpected costs and fees make the homebuying experience much more daunting.
According to the National Association of REALTORS® one-third of all homebuyers in 2018 were first-time homebuyers and the median age of those first-time folks was 32.
But there are a lot of different routes for first-time homebuyers to enter the housing market – and many of those roads are designed to help them traverse the sometimes craggily path toward homeownership.
For example, according to Freddie Mac, one-fourth of all first-time homebuyers used a gift or a loan from family members to buy their first home while an additional 10 percent received federal financial assistance.
Recently, the Providence Journal talked to several people who bought homes for the first time and identified how they approached buying a home for the first time and outlined them as a sort of menu for other first-time homebuyers to consider.
Here is a recap of each of the stories they presented:
The Married Couple (Herndon, Va.)
Who: Goncalo and Nancy Fernandes
Age: Goncalo (32), Nancy (33)
Career: Goncalo works in the auto industry while Nancy works in Medical Billing in nearby Ashburn, Va.
The Story: The Fernandes’ were saving up to buy a home and weren’t quite ready to buy, but they started to panic when they saw prices climbing and mortgage rates rising in the Fall of 2018. Within a month, they made an offer on a townhouse in Leesburg, Va. Originally, planning to save enough for a larger down payment, they were at 12 percent at the time of the purchase. However, they were nervous about putting all that money down and wanted to save some of the cash, so they only put 5 percent down with a conventional loan geared toward first-time homebuyers. They are paying a private mortgage insurance (PMI), but that is customary for most loans with a down payment of less than 20 percent. They used the extra cash to do work on the house, since it was a bit of a fixer upper. As such, they negotiated with the seller to pay for needed repairs (a new water heater, resealing windows and a patch on the roof) and they used that money as a credit toward closing costs to save the extra cash for further home renovations. Since they were able to put less down and negotiate for work to be done to the property before the sale, they can get the updated property appraised soon and could possibly get rid of the PMI.
The Family of Four with an Unemployed Parent (Paradise, Md.)
Who: Sayed Shah, Rija Tofeeq and their two young children.
Age: Sayed (33), Rija (27)
Career: Sayed (unemployed student), Rija (nurse)
The Story: Rija Tofeeq wasn’t sure if she and her husband Sayed Shah should buy a home or pay off her student loan debt. They were living with Tofeeq’s parents and she had $67,000 in debt and $50,000 in savings. That’s when Rija had heard about the Maryland SmartBuy Program which would allow her to pay off her student loan with a zero-interest second loan if they used the Maryland Mortgage Program to purchase a home. Shah held off on taking a new job to meet requirements. Tofeeq took out the loan in her name. She paid off $27,000 of her student loans and used another $20,000 as a 5 percent down payment on a single-family home in Paradise. The lender paid off the remaining $40,000 of Tofeeq’s loans and she took out a second loan on the house with the lender to repay that balance. The big deal for Tofeeq here is that as long as she stays in the home and pays off the loan at zero interest for five years, the rest of the loan will be forgiven.
A Single Mom and her Three Children (Washington, D.C.)
Who: Yaqueline “Jackie” Uribe Perez Clauss, three children aged 22, 17 and 6.
Career: High School Teacher
The Story: Clauss moved to Washington D.C. with her three children in 2016. Unable to afford to buy a home, she rented a basement apartment, but always had her eye on the prize of owning her own home. Wanting to live close to where she worked in Northwest Washington, affordability was a real issue. That’s when she utilized two home buyer programs to help her get into her own house in the Fort Lincoln Park neighborhood of Northeast Washington. First, she entered the District’s Inclusionary Zoning Program which creates a lottery to offer loans to a qualified applicant to buy an affordable home. The program has many steps, including income restrictions and a requirement to take classes on homebuyer education. While she waited to see if she would hit the lottery, Clauss also qualified for a $30,000 loan to help with a down payment though D.C.’s Home Purchase Assistance Program. That coupled with $2,000 she had saved on her own was the lynchpin for her to secure her own home once she won the inclusionary zoning lottery.
The Single Woman (Fredricksburg, Va.)
Who: Maria Lynard
Career: Remodeling Company Employee
The Story: Maria Lynard knew that the only way she alone could save money to buy a home was to live with her parents long enough to save the money needed for a down payment. So, she did, and when she was ready to buy a home, she spoke to a real estate agent who clued her in to homebuyer assistance programs in Virginia that are designed to help first-time homebuyers. Based on her status as a first-time homebuyer combined with her income, Lynard qualified for a Virginia Housing Development Authority grant of $4,000 to help cover her closing costs. This grant doesn’t need to be repaid because she took an online homebuyer class. Because of that assistance, she was able to put eight percent down on a $200,000 home that was move-in ready.
The Inheritance (Washington, D.C.)
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Who: Walker Timme
Career: Charter School Teacher
The Story: Walker Timme rented a studio apartment for 11 years. Then, when her mother died, she inherited money that allowed her to pay cash for her first home. However, Walker had important requirements before she bought. First, she wanted a condominium. Secondly, it needed two bedrooms and two bathrooms, so her Dad would have a place to stay comfortably when he would visit. The place also needed to allow for pets (specifically her dog) and be close to a D.C. Metro station. Finally, she wanted front desk security. Importantly, Timme not only worked with a real estate agent, but also a lender to help her find the right place. It worked out. Her monthly expenses which consist of condo fees, taxes and insurance total fewer dollars than what she paid in rent at the studio each month for more than a decade.