Working With the First-Time Homebuyer in Today’s Market
The number of pending-sale contracts in May of 2013 was higher than at any time since 2006, according to data released by the National Association of Realtors. Home prices have been steadily rising for the last 14 months, but the number of first-time homebuyers has been dropping for two years. In 2011, 36 percent of home purchases were attributed to the first-time homebuyer, a rate that dropped to 34 percent in 2012. Today, first-time buyers account for a mere 28 percent of the market.
Marketing to the first-time buyer in today’s housing climate requires a new approach. Millennials, those born in the last two decades of the 20th century, are entering a lending market in which home loans are harder to obtain than ever before, and they’re doing so with high income-to-debt ratios. Financing is difficult for this particular demographic to obtain due to the burden of student loans and credit card debt.
Establish long-term relationships
The road for a first-time homebuyer in today’s market is a long one. This means that mortgage professionals who hope to work with these homebuyers need to foster long-term relationships. Boosting a credit rating, saving for a down payment and lowering the debt-to-income ratio takes time, and many of today’s young buyers enter the market without a clear picture of how to manage the task.
Helping first-time homebuyers to understand the factors that affect their ability to secure financing and working with them to achieve the goal is essential. Taking a marketing approach with an educational focus can be extremely effective in establishing that trust relationship. Draw in this demographic by offering classes on understanding and improving credit ratings or how to financially prepare for home ownership. Recognize that these are contacts to be nurtured over time and are not instant turn-arounds.
Young buyers entering the housing market may not understand how much they’re capable of borrowing. As a result, they look at houses far out of their price range and are disappointed to discover that they’ve priced themselves out of the market.
Be sure to partner with local real estate agents for referrals of new clients for prequalification. Also talk with first-time home buyers to determine how much they could feasibly borrow, and how to make adjustments that affect the success of the underwriting process.
First-time buyers are the key to a strong housing market. A first-time buyer’s purchase of a starter home allows the current owners to move up into larger homes. As recovery in the market begins to price out buyers in this essential demographic, it’s imperative that lenders and mortgage professionals look for new and innovative ways to market to young, first-time buyers.