For first-time homebuyers, the transition from renting to homeownership can be exciting, overwhelming, and anxiety-inducing at the same time. But as Gary Keller and Jay Papasan write in the second edition of Your First Home, “People who live their most fulfilling lives make decisions based on facts, not fear.”
Below, we outline four powerful facts from Your First Home to help guide anxious homeowners toward the fulfillment and abundance that Keller and Papasan recognize: When delivered with empathy, care, and expertise, these facts can ease anxiety and help move clients closer to experiencing all the benefits that homeownership has to offer.
Fear No. 1: “I can't afford a house right now.”
Fact: You won’t know what you can or can’t do until you do the math.
If you are currently renting, you can generally afford to buy a home. In the United States, from a financial perspective, the tax savings on mortgage interest alone can make up a large part of the difference between rent and mortgage payments. The tax deduction you receive at the end of the year generally helps you save a lot of money.
Plus, depending on your credit score, you might end up taking out a larger loan than you think you should.Note: The credit scores used for mortgage lending tend to reflect a broader range of your overall credit score.
Finally, while the upfront costs of buying a home may be high, if you plan to stay in the same place for several years, the equity you build can ultimately be a financial boon. Also, did you know you can still be considered a “first-time” buyer even if you've owned a home? For many programs, the definition of a first-time home buyer includes someone who has never owned a home or has not owned a home in the past three years.
Read more: A story about building wealth and affordability
Fear No. 2: “I should wait until the real estate market improves.”
Fact: There is no wrong time to buy the right home.
Whether “right” means the right price or the right property, waiting for perfect market timing almost always doesn't work in your favor. If you don't believe us, just look back to the Great Recession, when the bubble around the housing market burst, GDP fell 4.5%, and unemployment rose to about 9.5%. Everyone is still feeling the effects of this incredible financial event. But those who survived the Great Recession, like those who endured the Great Depression, got through it and benefited from an era of financial growth. In fact, just after the Great Recession, the United States entered its longest period of price growth and overall prosperity since World War II. In fact, even the biggest economic downturns are, well, normal. Even when there were events that threatened to chill the economy, like the COVID-19 pandemic, the housing market still continued to thrive.
Ultimately, there are two ways to make money in real estate: timing and time. That is, either catch the right moment to buy a home before prices rise, or hold on to it long enough until prices rise and make it a good investment to buy. If you miss the first moment, you can certainly count on the second.
Fear #3: “I don't have the money for a down payment.”
Fact: There are many different down payment options.
Many people believe that buying a home requires a large down payment of as much as 20%, but this is rarely true. There are always options for much less than this amount (as little as 5%, and sometimes even less). Plus, most states have down payment assistance programs that can help you finance your purchase.
House hacking is also a great way to make homeownership a more affordable option. House hacking involves purchasing a property and renting out one of the bedrooms or units. This rental income can go towards your mortgage payments. Or, you could join a home rental program like Vrbo or Airbnb. While it's not always ideal, renting out your home while you're on vacation can always help you make your monthly mortgage payment.
Fear #4: “I can't buy a house because my credit score is not good.”
Fact: Having a less than perfect credit score doesn't necessarily mean you can't buy a home.
Having a good credit score is important, but having a low score doesn't necessarily mean you can't talk to a lender and explore your options. A good loan officer (or mortgage professional) should be able to help you resolve any issues with your credit by showing you ways to move or consolidate your debt, or by referring you to a credit counselor who can put together a plan for you.
Even if you're facing the problem of no credit history because you're just starting out in the workforce or don't regularly shop on credit, there are a few solutions you may want to consider. One is to secure financing with the help of a cosigner, such as a parent or close relative, who can guarantee your ability to pay. Another is to find a lender who's willing to use other history, such as student loans, rent, or utility payments.
Becoming an expert in first-time home buying
If you're a real estate agent, hosting an educational home buying seminar can help demystify the home buying process and attract first-time homebuyers. The seminar package includes everything you need to get started, including a customizable presentation, social marketing plan and assets, email templates and participant worksheets. KW's “Your First Home” seminar package was created to complement Your First Home by Gary Keller and Jay Papasan. Seminar materials are provided free of charge to KW agents, and the book and seminar package are available in English and Spanish.
You can also find free resources on the Your First Home website, including information on how to build your real estate dream team and tools your clients can use to determine their homeownership criteria.