Mortgage Myths & First-Time Home Buyers
If you have never done something before, then it is completely understandable that you would know little about how to do it. This is as true for something small and with relatively low stakes, like a new game. It is just as true for something that is very complex with the largest stakes imaginable, like buying a house. For many first-time home buyers, they do not know enough to know what they do not even know. That is not an insult to first-time home buyers or anyone who is new at anything. Novices are supposed to have a knowledge gap. Unfortunately, the knowledge gap can get filled in with harmful myths that can prevent first-time home buyers from getting a mortgage and a new house. The team at Peoples Choice Mortgage is here to help debunk the biggest mortgage myths of first-time home buyers.
Myth 1: First-Time Home Buyers are Priced Out by High Home Prices
One of the biggest myths out there in the real estate market is that home prices are too high for first-time home buyers who need a home loan. Palm Beach, Boston, Aurora, Providence and nearly every other city in America has seen their home prices skyrocket. So, the data clearly backs up part of this myth and shows there is a kernel of truth. There is no denying that home prices have risen dramatically. However, do the numbers show that first-time home buyers are suffering and cannot afford a mortgage?
The data does not back it up. In 2021, home prices rose by about 19 percent. At the same time, the number of mortgages for new home purchases from first-time home buyers also increased YOY. Even though home prices were rising, first-time home buyers were getting home loans with enough ease to keep up with the market. While home prices reached all-time highs, first-time home buyers were taking advantage of mortgage rates that were at all-time lows.
One reason for the persistence of this myth is that many confuse home price with affordability. Whether you can afford a house is based on much more than the closing price of the house. If you are buying a house with a home loan, then you need to consider whether you can afford the mortgage payments. A large benefit of locking in low mortgage rates in a home loan is that your mortgage payments are much lower than at higher mortgage rates. Additionally, mortgage payments are never considered affordable in a vacuum. It is not your mortgage payment or nothing when making budgeting and affordability decisions. If you are not paying your mortgage and building equity, then you are paying rent. In most markets in the country, rent is even more expensive than mortgage payments. Even with rising home prices, first-time home buyers can afford to buy new homes.
Myth 2: It is Impossible to Find a House
It is no secret that housing inventory is incredibly low. As a result, even if you are able to easily qualify for a home loan and can afford to buy a new house, it is hard to find a house. However, it is important to keep in mind that hard to find a house is not the same thing as impossible. There are houses out there, but it might take some looking. The good news for all home buyers, but especially first-time home buyers is that inventory has improved. We have actually just seen the first increase in inventory since 2019. It was not a large increase, in fact it was only 1.5 percent, but that is still the first increase in a few years, so it is welcomed. We have been told for a long time that inventory would make its way to the market and it appears to be true.
Another reason why it is not impossible for first-time home buyers is that there are more options than merely single-family homes. First-time home buyers have been turning to buying condo units or multi-family homes in order to deal with the single-family home shortage. Condos cost a lot less than single-family homes and often come with fantastic amenities like pools, gyms, and other community areas.
Many first-time home buyers are particularly excited about buying mult-family homes. First, they can still use FHA loans if they qualify. Second, even though mult-family properties cost more than single-family homes, they are more affordable for many first-time home buyers. The reason for this is that you are able to use future rental income to help you qualify for a mortgage. Plus, with rents increasing the way they are, that income stream can help you pay down the principle on your home loan. All of these benefits are reasons why first-time home buyers are buying mult-family properties. The popularity of multifamily homes is why so many have been permitted to be built in recent months.
Final Thoughts
Some myths are helpful and give you hope. They provide you with some sort of motivating legend that lets you know you can overcome any odds. Other myths are downright discouraging because all they do is perpetuate a feeling of hopelessness. It is important to figure out if myths are correct and if they are serving you well before you hold on to them. First-time home buyers should heed this lesson. Some of the more prevalent myths about first-time home buyers in today’s market are false and harm first-time home buyers. They tell you it is impossible to get a home loan, and that even if you do, it is impossible to buy a house. Neither of those are true.
It is time to stop listening to the voices telling you that you cannot be a homeowner and it is time to put people in your corner who can make that happen. The team at Peoples Choice Mortgage are the people you need; dedicated and professional mortgage brokers. Boston or any other high demand market might be tough for first-time home buyers, but having a team can balance the playing field. Working with mortgage brokers who have access to hundreds of lenders and who know your market intimately are a huge advantage. The truth is that first-time home buyers are buying houses in every market in this country. With our help, we hope that will soon be you. Contact us today if you are ready to make it happen.
