With interesting rates remaining low, new prospective buyers continue to enter the market everyday. The strong seller’s market that has persisted over the past year continues to present challenges for those buyers, however. As rent prices continue to rise, many renters want to know what they can do to get ready for buying their first home. According to recent data from ApartmentList.com:
“The first half of 2021 has seen the fastest growth in rent prices since the start of our estimates in 2017. Our national rent index has increased by 11.4 percent since January . . . .”
Those rising rental costs may make it seem and less possible for them to purchase. But the truth is, there are ways for buyers to prepare for a purchase of their first home. Here’s some expert advice on what they can do to escape rising rents.
Start Saving – Even Small Amounts – Now
Experts agree, setting aside what they can – even smaller amounts of money – into a dedicated savings account is a great starting point when it comes to saving for a down payment. As Cindy Zuniga-Sanchez, Founder of Zero-Based Budget Coaching LLC, says:
“I recommend saving for a home in a ‘sinking fund’ . . . . This is a savings account separate from your emergency fund that you use to save for a short or mid-term expense.”
Zuniga-Sanchez adds saving in smaller increments can help make a large goal – such as saving for a down payment –achievable:
“Breaking up your goals into smaller bite-sized pieces by saving incrementally can make a large daunting number more manageable.”
Assess Finances and Work on Their Credit
Another tip experts recommend: take a look at overall finances, credit score, and find ways to reduce debt. According to the U.S. Department of Housing and Urban Development, the average credit score of first-time homebuyers is 716. If a client isn’t sure what their credit score is, there are numerous online tools that can help them check. If their score is below that average, advise them not to fret too much. Remind them that an average number doesn’t represent an individual, and loan options such as a FHA loan, exist specifically to empower folks without a perfect credit score.
Identify Client Priorities
Finally, it’s important they begin to work on identifying what is most important regarding their future home. Working with them to identify priorities and setting an achievable plan can help to align the above goals with success. Most importantly, as a real estate professional you can help clients understand how homeownership is achievable. As Lauren Bringle, Accredited Financial Advisor with Self Financial, says:
“Don’t write home ownership off just because you have a low income . . . . With the right tools, resources and assistance, you could still achieve your dream.”
If you have clients who are interested in buying but aren’t quite ready to transact, coach them in the right direction, as helping to build a substantial pipeline can keep your business afloat when the market gets tough.