Online tools that help demystify the home buying process
June is National Homeownership Month, and it’s a great time to talk about Homeownership in today’s Digital Age. Utilizing the web to assist you in this process can help reduce some of the stress associated with such an emotionally charged process.
For many, home ownership will represent the largest purchase of their lifetime. Owning a home can be the very beginning of wealth creation, help you establish roots in a community, and hopefully create memories that last decades. Working with the right realtor and lender can help the process. You will want to make sure they are experienced and willing to answer all your questions, so ask people in your network, and then interview a few lenders and realtors. In the interim go online to utilize the abundant supply of helpful information about the home buying process. You will be glad you did.
That’s because technology is such a powerful tool. It can save time (via mobile payments or online loan applications) and money (comparison shopping has never been easier), and now it’s becoming a routine source of information, particularly among millennials (age 18 to 36), in the purchase or sale of a home.
More than 50 percent of buyers from all generations frequently used the Internet to search for their home, but that figure jumps to 93 percent for buyers 36 years and younger, according to the National Association of Realtors’ 2017 Home Buyer and Seller Generation Trends report. That’s worth noting because millennials represent the largest share of homebuyers (34 percent), and two-thirds are first-time homebuyers.
You can find a wealth of information about the home buying process online at the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation. Both have resources to help demystify the home buying process. But having a working knowledge of the process, and available programs to assist first-time homebuyers, is a far cry from determining the right loan to meet a consumer’s unique financial needs and budget considerations.
The personal finance website NerdWallet found most consumers under 36 would prefer owning to renting, but postponed the purchase of a home because of real or perceived difficulties in affording it. That’s where a lender such as a community bank comes in. In-house experts can explain not only what you can afford and what to expect during the process, but other factors worth considering when determining the right time to buy a home.
For those who are ready to purchase, there are several options to consider in addition to conventional loans, including mortgages insured by the Federal Housing Administration. FHA loans represent 21 percent of the overall mortgage loan market, with millennial homebuyers comprising 35 percent of its customers. This might be because FHA loans only require a 3.5 percent down payment and typically have higher loan-to-value ratios and lower credit score requirements than conventional loans, though buyers eventually have to refinance their loans if they want to avoid paying private mortgage insurance for the life of the loan. Also, check to see if your bank offers their own First-Time Homebuyer program.
The U.S. Department of Veterans Affairs offers generous borrowing terms to service members, veterans and surviving spouses, often requiring no down payment or mortgage insurance. While the VA has only a few requirements for things like debt and sufficient income, VA lenders may add their own additional requirements. According to the National Association of Realtors, 12 percent of all homebuyers chose a VA loan, including 20 percent of buyers age 71 years and older.
In addition to available federal homeownership and home buying assistance programs, there are numerous programs sponsored by state and local governments as well as other organizations that your lender can recommend during a one-on-one to make homeownership more affordable.
So get to know your local lender, meet with a realtor or two, and learn about the process. Plain and simple, the more you know about the process going in, the less stressed you stand to be on settlement day.
Written by Jim Gillen, VP Chief Marketing Officer
ESSA Bank & Trust