“Roughly 42 percent of millennials say they want to buy a home in the next one to five years, compared to just 31 percent of Generation X, and by the end of 2015 millennials will become the largest home-buying age group. The lack of home-buying activity from millennials thus far is decidedly not because this generation isn’t interested in homeownership, but instead because younger Americans have been delaying getting married and having children, two key drivers in the decision to buy that first home. As this generation matures, they will become a home-buying force to be reckoned with.”
– Dr. Stan Humphries, Zillow chief economist
Millennials are eager to buy their first homes, this is a fact. Many of us who have wanted to own our own homes have been stopped by the classic fears of:
I can’t afford it.
I want to wait until the market gets better.
I don’t have money for a down payment.
I won’t get my dream home.
These fears are typical for all First Time Home Buyers, but in 2015 the reality is you can afford it, this is a great market to buy your first home, there are down payment options to fit everyone and lastly, your first home doesn’t need to be your dream home.
If you’re a First Time Home Buyer in Northern Virginia or Washington D.C., the first “fear” is understandable. We have high prices, there’s no way around that, but in 2015 buyers have more buying power than ever before for a few reasons. The two major ones are great interest rates, but also new down payment options/modifications to current FHA guidelines.
Now I don’t want to get too into interest rates as I’m not a lender, but the graph below shows annual interest rates since 1972. You can see that since 2010, we’ve been historically very low. The annual interest rate for 2014 was 4.2%, for much of the new year (2015) has seen interest rates below 4.0%. They are constantly changing and fluctuate day to day, but they’ve been anywhere from around 3.5% to around 4.0%. The difference of one percentage point of interest could be a couple hundred dollars depending on your loan which can add up quickly! No one knows how long interest rates are going to stay low, but they really can’t get much lower, so there’s no point in waiting!
These new loan options also tie into “I don’t have enough money for a down payment”. Fannie Mae and Freddie Mac just recently came out with a new 3% down payment for conventional loans. The previous minimum down payment for a conventional loan was 5%. Borrowers will still have to pay private mortgage insurance (PMI) until they reach 20% loan to value, but this new down payment option means you can buy your first home in Arlington for $300,000 with just $9,000 down. Many First Time Home Buyers have the allusion that you need 20% down to buy your first home and that is simply not true. Many of the first home buyers I have worked with don’t have 20% down. Lenders also have 0% down payment options for those that qualify.
FHA modified their PMI rates this year. They reduced them from 1.35% to .085%. This slight adjustment is estimated to save the average First Time Home Buyer almost a $1,000 a year. Again, I’m not a lender so I can’t get too technical and every situation is different, so you will want to speak to a lender to get these firm numbers and see how this affects you. If you’re interested in getting in touch with a lender, reach out to us and we’ll connect you with some trusted professionals in Northern Virginia and D.C. so you can discuss your options. Getting a pre-approval is a quick and easy way to figure out your buying power and evaluate if now is the right time!
As I mentioned above, being a First Time Home Buyer in Arlington, Fairfax, Reston, Ashburn, into D.C. or anywhere in NOVA can be intimidating, home prices are high and seem unattainable but the reality is, your first home is waiting for you! You need to find the right area and home for you. Many areas around the country are still suffering from the housing market crash but our area bounced back relatively quickly. Northern Virginia and Washington D.C. real estate markets are highly focused, every city and every zip code has a very different market than the next. It goes back to location, location, location. Now is a great time to buy your first home, browse around our Search Page to see what’s on the market in your area and check out our Free Mortgage Calculator to get a feel for prices. Below are some common common price breaks in Arlington, click on the searches to see what’s on the market today!
The Next Step
The Spring Market is quickly approaching and this always tends to be a very active time in the DC metro area. If you’re about to be a First Time Home Buyer in Arlington, Reston, Fairfax, Washington D.C. or any other area in Northern Virginia, you will want to get the ball rolling now to get everything in line for when the time is right. The Spring Market is generally more competitive and you need to have your ducks in a row and be ready to buy. We always advise our clients to do two things first, get a pre-approval and sit for a buyer’s consultation. Though a pre-approval sounds very formal and committal, it’s not. It’s formal in a sense that you will turn over documents and get a firm number for what you can afford, but it’s not a commitment to buy right now nor use that particular lender. If the numbers aren’t right for you, then you can hold off until they are, a lender can also advise you on ways to improve your credit score to get a better rate. The buyer’s consultation is a meeting with a realtor in which you go over the process and talk details. It’s a necessary step that everyone needs to take when buying their first home, it’s so tempting to jump out there and go see properties but the process is so much smoother when you’ve prepared.
2015 is going to be a great year for millennial First Time Home Buyers in Arlington, Reston, Fairfax, D.C. and all over NOVA. The market is ready for you! To learn more about the home buying process, sign up for a Free Buyer’s Consultation below! The Canto Group loves working with First Time Home Buyers. Kevin was a recent First Time Home Buyer himself and has guided many millennials through the process already. Friend him on Facebook, text, email or call him to get in touch today!
For more First Time Home Buyer information, check out our blog series including 18 Things Every First Time Home Buyer Needs To Know and What Are Costs Associated With Buying a Home!