If we had to describe the current state of the market in one word, “uncertain” would be our top pick.
As real estate experts, we know how to navigate even the trickiest waters. But buyer and seller clients may be struggling to grasp what market shifts mean, how it affects them, and what they should do next.
Buyers, especially first-time home buyers, are facing a great deal of obstacles. They also need help knowing and understanding all of their options as they navigate today’s market.
Luckily, you can help.
What’s One of the Biggest Obstacles Buyers Face?
In this uncertain, constantly-shifting market, one of the biggest barriers to homeownership that buyers face is securing an adequate down payment.
Many new buyers abide by the rule of thumb of having 20% of the home’s price on-hand for their down payment. But with a median home price of $392,000 in 2023, coming up with this cash can be exceedingly difficult. Especially considering the median household income in the United States is just a hair over $80,000.
As a real estate agent with plenty of experience under your belt, you hold the keys to help buyers understand the 20% rule does not always apply. You can also empower buyers by educating them about alternate ways to source a down payment or get assistance for their home-buying journey.
So, how can you help?
It Starts with Education
Knowledge is power, and what better way to calm fears and empower your buyers than by teaching them? The first step is helping buyers understand they don’t always need to put 20% into their down payment for a home.
Taking the time to understand your buyers’ budget, then walking them through a realistic down payment can go a long way in showing them the possibility of their buying power.
We know that a down payment can start as low as 3%, so it’s also important to help buyers fully understand the impact this can have on their buying power. Make sure buyers know the risks this can pose to sellers’ viewpoints of their readiness and quality as a buyer. It’s also important to flag that a smaller down payment can impact the terms they get from lenders and other programs.
And, since a lower down payment creates the need for mortgage insurance, make sure your buyers understand what private mortgage insurance (PMI) is, and how this impacts their monthly payments.
This will allow them to budget accordingly, readjust their goals as needed, and also help your working relationship be more collaborative.
As you continue educating your buyers about their options for down payments, you can also work with them to assess if they qualify for programs that specialize in assisting in this area.
Programs That Can Help with Down Payments
Many down payment assistance (DPA) programs are focused specifically on first-time home buyers, and also may have limitations of how much of the down payment they’ll provide.
Encourage your clients to drill down the programs that align best with their qualifications, and then research each individual program deeper.
Some DPA programs to make your buyer clients aware of include:
Local programs: There are over 2,000 down payment assistance programs with varying specifications nationwide. On a local level, the state, county, or city governments or organizations offer these types of programs. There are also programs offered by nonprofit organizations and other housing-focused groups.
Grants: Grants are essentially free money, an added bonus for your buyer clients to know as a possibility. Grants typically don’t need to be repaid, but some DPA programs may use “grant” as a term. Make sure buyers are zeroing in on the fine print to ensure they know if they’re getting a grant or something different.
Lease-to-own programs: This type of arrangement allows buyers to lease the property for a specified term with the option to purchase at the end of that period. Usually, the tenant pays above market-average rent on a monthly basis. When the lease approaches its end, the extra cash paid can be applied to the down payment. This option also allows buyers to spend more time saving to add to their down payment.
Special employment-based programs: These federal programs are targeted towards public service members like firefighters, EMTs, law enforcement, military, and school employees.
Buyers, especially first-timers, may not be aware of the wide variety of options to help them tackle the need for a down payment. Working hand in hand with you can help them understand their options and proceed accordingly.
Be Equipped for Any Market Shifts that Appear.