A wave of first-time homebuyers is hitting the market

by Kasi Johnston05 Aug 2020

The past few months have been an emotional rollercoaster for those looking to enter the housing market. After hitting historically low levels in April, consumer sentiment bounced back significantly in June, with renters especially interested in potentially taking the plunge into homeownership.

The Fannie Mae Home Purchase Sentiment Index found the share of consumers who think it is a good time to buy a home increased from 52% to 61% month-over-month. The survey also indicated that the number of renters interested in shifting to homeownership reached its highest level in five years, suggesting favorable conditions for first-time homebuyers.  

With an overwhelming amount of information in the news, and still a lot of confusion and uncertainty due to the pandemic, it’s up to mortgage brokers to educate their clients and bring clarity and decisiveness to the wave of first-time homebuyers looking to enter the market.

“First-time homebuyers need to understand what monthly payment they can afford compared to what they are currently paying in rent,” said Austin Niemiec, Executive Vice President at Quicken Loans Mortgage Services (QLMS). “It's the responsibility of the broker community to use their expertise to provide confidence. They should embrace their role as a trusted advisor.”

Niemiec says it’s more than just preaching about low interest rates. He suggests sitting with clients and doing the math on the entire transaction – including mortgage insurance, closing costs and things that many first-time homebuyers don’t understand. By taking the time to break down clients’ finances and what they can afford, brokers are providing an educational service, which will give them greater clarity and confidence.

“If their rent is $1500 per month, show them what type of home they can get with a $1500 mortgage payment and, on top of that, how much equity can be built up in five years, which they won’t get when renting,” said Niemiec.

The COVID-19 pandemic has proven that flexibility is king. It is also one of the main reasons that renters choose to keep renting, but Niemiec wants to bust the myth that owning a home means being locked in. Buying now doesn’t mean the homeowner can’t move again in a few years, if needed, said Niemiec.

“The current recession is caused by the pandemic, resulting in high levels of unemployment. Regardless, home prices continue to rise because demand is high and supply is low,” he said. “There is not a fundamental flaw in our financial system in the mortgage industry like there was in 2008. We aren’t seeing cases where owners are underwater and unable to sell like the last recession. Homeowners will continue to build equity and have the flexibility to be able to sell in a few years if need be.”

QLMS offers mortgage products that only require 3% to 5% down, along with loan terms between eight and 30 years – providing flexible options suitable for many different types of borrowers. In terms of supporting broker partners and educating their clients, it also offers several resources on its website, a marketing hub with material for social media or mailers and teaching tools on how to speak with first-time homebuyers or anyone considering the purchase of a home.

“We support our broker partners by providing them a strong foundation built on speed, certainty, technology and incredible rates.  It’s a very competitive market right now, and it’s our responsibility to equip our partners with an elite platform to grow their business on,” said Niemiec.