The First Time Homebuyer Profile
What does a first time home buyer actually look like? Chances are, they look a lot like you. You know, we’re often asked. Am I too old? Am I too young? You know, do I have enough in savings? Is my credit high enough? You know, because there’s really not an understanding of what the first time home buyers actually look like.
And those myths of, you know, having to save 20% or having a credit score of seven 50 can actually hold people back. So today we’re gonna just kind of go over the profile of a first time home buyer in hopes that you can see that you’re actually a lot closer than you think.
What You’ll Learn from this Episode:
- The Average Age of a First Time Homebuyer
- The Median Income of First Time Homebuyers
- The Credit Score Needed to Buy Your First Home
- How Much Money You Need for a Down Payment
- And much more!
00:00 – You Look Like a First Time Homebuyer
00:40 – Intro
01:02 – Welcome to Homeowner Prep
01:50 – The Average Age of a First Time Homebuyer
04:43 – The Median Income of a First Time Homebuyer
05:58 – The Family Makeup of a First Time Homebuyer
07:43 – The Credit Score of a First Time Homebuyer
09:21 – The Down Payment of a First Time Homebuyer
12:00 – Get Started with Homeowner Prep
13:10 – Outro
“You’re not too old or too young to become a first time homebuyer.”Eric Hellon
Full Episode Transcript:
Hello and welcome to the Homeowner Prep Podcast. I’m your host Eric Hellon, and this podcast was created to provide real world advice and accountability for first time home buyers. We’ll be interviewing industry experts, providing some how-tos, and talking with first time home buyers about their personal experiences. If that sounds interesting to you, please be sure to subscribe and if you’re watching on YouTube, be sure to hit the little bell to be notified when new episodes release. Now let’s dive into today’s episode.
Welcome to the Homeowner Prep Podcast. In today’s episode, we’re going to dive in and really talk about the average first time home buyer and what that person looks like. Oftentimes, you know, we’re hearing these myths that are out there, things that you have to do in order to buy your first home and so our job is really to debunk those myths. You know, we really want you to understand that buying a home is not as difficult as it may seem and really when you’re teaming up with somebody who’s going to be there for you and help you get there, you’re gonna get there not only faster, but you’re gonna get there smarter. You’re gonna be well prepared to be a first time home buyer, so I wanna dive into just some of the profile attributes, if you would, of a first time homeowner here in America.
The first thing that I want to touch on is age. We often get questions about, you know, “Hey, I wanna buy a house, but I might be too young or I wanna buy a home, but I’m too old now. You know, I might as well just keep renting.” And the truth of the matter is, you’re not too old or too young to become a first time home buyer. By the definition, a first time home buyer is somebody who’s never owned real estate or somebody who has owned, but it’s been more than three years since they’ve owned previously.
So case in point, let’s say you bought a home in 2010 and you sold it in 2015, and you’ve been renting or living with family until 2022. Well, you are now a first time home buyer again. So by the definition, you can buy another home using a first time home buyer program. So with that in mind, you can see how you’re not too old. It’s never too late and even if you bought in the past, you can buy again using the same programs.
The average age here in America for the average first time home buyer in the early 1990s was 28 years old. So there’s a lot of talk about, you know, people are buying later in life and they have all these hurdles to overcome. Home prices are so high, so, you know, people are buying much, much later, mid thirties, you know, going into late thirties. And the truth of the matter is, here we are in 2022, the average, homeowner is 33. So it’s gone from 28 to 33. Yes, there has been an increase and that is the average. But the things that hold them back mostly are the myths that they believe or the things that are holding them back that truly they have already overcome, and I’ll dive into a few of those in a little bit, but you know with buying a home a little bit later in life, there’s also a change in the way that parenting is done.
So, oftentimes back, you know, in the eighties, early nineties, it was all about, “Hey, you’re turning 18, you gotta go!” You know, and so now what we’re seeing is are that, you know, hey, there’s a younger generation and they’re allowed to stay longer in the home, you know, make some decisions, figure things out. We cannot expect an 18 year old to know what they wanna do with the rest of their life. You know, it’s just an unfair advantage. And so what we want is, we want our children to know where they want to go. You know, don’t rush out to in on your own and take on all this financial burdens that come, you know, with that. And so, you know, where are you gonna go? What is the plan? How can I help you get there is more of the thought process of parenting now. So, yes, again, from the early 1990s, when the average first time home buyer was just 28 years old. Now, the average first time home buyer is actually 33 years old, so that’s the difference in the age.
The second thing that I want to address is income. So there is a myth that, hey, if I don’t have a six figure income, I can’t afford to buy a house, and it’s just not true. The median income for first time home buyers in America was just over $50,000, so it’s not how much you make it’s how much you keep, right?
So what we do, whenever we’re working with families, sitting down, and we’re going over a budget and we’re saying, okay, here’s how much you earn, but how much of that are you keeping? Are you paying yourself first? Are you investing? You know, what are you doing with that money? Because that’s what makes the difference.
We’ve sat down with couples who combined make six figures. We sat down with couples who each make six figures, and we see the same problems in both households, overspending, credit card debt, things that are holding them back, that are personal decisions that they’re making with their money, instead of paying themselves first and investing that money and preparing for home ownership.
So it’s not about how much you make, it’s really about how much you keep. Again, the median income for a first time home buyer in America is just over $50,000. So keep that in mind.
Another aspect of that is another myth that, hey, I need to be married before I buy a home. The family dynamic of a first time home buyer, you know, they’re married and they have children and that’s why they wanna own, when in fact, 60% of first time home buyers were unmarried individuals. So these are single men and single women who are either buying a home on their own or they are a couple, but they’re not married and then they’re buying a home.
So again, getting in the game is very important. We did a whole episode about buying the right now home, and really that episode was focused on just getting you in the game instead of throwing your money away on rent. Even if you’re buying a condo or a town home to get started as a single individual or you know, as a couple, but you’re not married yet, you know, oftentimes you’re going to upgrade that home at a later time, but as you sit back and you’re waiting to buy the upgraded home, you’re missing out on all the equity that’s being built over time.
Home prices are going up, but not only that, at a more accelerated rate rents are going up, so you’re having to spend more, so you’re saving less, and as home prices are going up, you’re just simply getting priced out of the market, which is a scary thing.
So, you know, you want to get in the game as quickly as possible, as quickly as you are approved to buy, because the bank is gonna have harder guidelines and qualifications. So if you can meet their guidelines and they pre-approve you to buy, then you’re gonna be pre-approved and ready to go. So, You know, again, it’s not about being married, it’s not about having kids, 60% of these home first time home buyers are not married, and so it’s just about getting in the game as quickly as possible.
The next thing I want to touch on is dealing with credit. I talked with a couple just a couple weeks ago, and they had over a 720 credit score, and they were still wondering if their credit was good enough to buy their first place.
So with an FHA, first time home loan, you are actually qualified to buy with a 580 credit score for 3.5%. Your credit score can actually be as low as 500, but you’re gonna have to come in with more down, typically 10%. So when they were sitting back waiting and thinking that they were not qualified, they were actually missing out on very low interest rates.
They’re missing out on, more affordable housing as the market was going up and interest rates are going up, they’re sitting on the sideline just thinking that they’re not ready, and in fact they are. So oftentimes, you know, just taking that first step and having a conversation, reaching out to us and seeing if you’re, you’re good to go will help you in realizing that you’re a lot closer than you think.
So we actually talked to them and said, no, your credit is good. They have more than enough saved in the bank. They were ready to buy and they were simply putting themselves on timeout, you know, and on the sideline watching everybody else buy the homes that they loved. They’re visiting open houses and things of that nature, and they just thought that they weren’t ready.
So, you know, take that first step, discover and say, okay, where am I? You know, things change all the time, interest rates change all the time, qualifications for home loans change all the time, there’s first time home buyer down payment assistance programs that come and go. And so just reaching out and seeing if you’re ready to go right now will help you.
You know, when it comes to credit, it also comes down to down payments. Obviously, having a higher credit score is great, you know, you’re gonna have a better rate, but when it comes to putting more money down, you’re gonna say, okay, well hey my credit is higher I can probably get away with just 3.5%.
Again, you wanna make sure your mortgage is affordable, you know, within budget. But if you don’t have to put down, 10%, 20%, you should make better use of that capital. You know, the bank is going to have a guideline of. 3.5% for an FHA program. Again, there’s different programs out there, but if you’re gonna put down 3.5%, you will have mortgage insurance so that’s an additional cost. So you want to take all of that into consideration to see if it makes sense for you to put less money down or more money down. And the reason I bring that up is because the average first time home buyer in America is actually putting down 8%. Which is more than the 3.5% requirement.
So they’re oftentimes thinking, “Hey, I need to put more money down. I need to, you know, make sure that my, mortgage payment is affordable and within budget”, and I understand that, but you know, the requirement is not 8%. The requirement is not 10% or 20% the requirement for the FHA first time home buyers program is 3.5. The requirement for VA, if you qualify for VA, is 0, zero money down, right? You can also, if you’re Native American and you’re on a tribal roll, you qualify for the Native American 184 Loan Program, which is a HUD program, two and a quarter down. So again, tt’s not the 10%, it’s not the 20% that people think, you won’t have to put that much money down and have that much money in the bank. And if you do have that much, you know, then you can assess if it worth it to put it into a home as a down payment, or is it better for me to invest that in a mutual fund that’s earning double digits, you know, over time.
So, you know, you’ll make that assessment typically when somebody, when a family reaches out to us. We’re gonna sit down and we’re gonna see where they’re at financially, see if it makes sense for them to go after an FHA program, a conventional program, or if they qualify for any other programs and if they qualify for down payment assistance programs. That’s gonna be based on the median income for the county that you’re in.
So definitely we want you to reach out to us. We want you to understand that you’re probably a lot closer to buying your first home and help you overcome the myths that are out there about saving 20%, having a higher than 700 credit score, or being too young or too old, you know, those are things that are gonna hold you back from taking that first step.
We really want you to get started with us, we want you to visit our website at homeownerprep.com/start to see where you’re at. You know, we have opportunities if you’re not ready to start the conversation and really sit down with a coach and create a plan, then download our free eBook, understand the home buying process. Let that be the motivation and discover your why, right?
If you’re ready to talk with a coach, you can do that on that same website homeownerprep.com/start and if you’re ready to buy and you just need a referral to an agent or loan officer in your area, you can do that there as well.
We’d love to hear from you. We wanna get your questions. If you have direct questions about your unique situation or scenario, you can always reach us on social media, on Instagram you can find us @HomeownerPrep and you can ask some direct questions there as well.
We’re here to help you. We want you to take the first step. We don’t want you to put yourself on the sideline when you can get in the game, so definitely don’t hesitate to reach out to us. I hope this information was valuable to you. I look forward to providing you more great content next week, and until then, be blessed.
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