Here comes a wave of first-time home buyers
Looks like first-time buyers will be making a big impact on the housing market in the next three years. A study released by TransUnion says that about 8.3 million first-time buyers are expected to enter the mortgage market from 2020 through 2022.
That’s a significant number of first-time home buyers. In fact, from 2016 through 2018, only 7.6 million first-time buyers entered the mortgage market.
What is inspiring these first-timers to buy a home? According to the TransUnion survey, 45 percent said they wanted more privacy while 44 percent said they wanted to build equity or wealth. The survey found that 24 percent of first-time buyers were jumping into the housing market because they were getting married. An additional 23 percent told TransUnion that they were buying their first home because their families were growing.
The TransUnion survey also asked respondents why they waited to buy a first home. The biggest reason? A total of 58 percent of respondents said they were concerned that they wouldn’t have enough money for a down payment or their monthly mortgage payments.
There is some confusion, though, regarding down payments. About half of those survey respondents who were worried about not having enough money thought that they needed a down payment of 10 percent or 20 percent of a home’s purchase price.
This is a myth. It’s possible to qualify for a mortgage from a private lender with a down payment of as little as 3 percent of a home’s purchase price. And if your FICO credit score is 580 or higher, you can qualify for a loan insured by the Federal Housing Administration — better known as an FHA loan — with a down payment of as little as 3.5 percent of a home’s purchase price.
The coming wave of first-time home buyers bodes well for the U.S. and Chicago housing markets. The more demand for homes, the more likely it is that these residences will increase in value.