First-Time Homebuyers Heavily Impacted By COVID-19
Work from home lifestyle drives families to reconsider living space; American Consumer Credit Counseling explains what consumers need to know
(Boston, MA) – June 10, 2021 – Buying a home can be a complicated and intimidating process, especially during a pandemic. At the start of the COVID-19 public health crisis, U.S. housing sales took a hit due to the uncertainty consumers had in the economy. Flashforward a couple months and the housing market skyrocketed.
“Owning a home is probably the biggest investment a consumer will make in their lifetime,” said Allen Amadin, President and CEO of American Consumer Credit Counseling. “Buying a house requires a lot of research, time, patience and, of course, a big financial commitment. Fortunately, even during these uncertain times, there are several resources that consumers can turn to for guidance.”
Now more than ever, it’s important that first-time homebuyers come prepared and understand the financial commitment. That means deciding ahead of time what they can afford and taking a pre-purchase homebuyer education class to save time and stress. Most lenders will require this type of course in order to qualify for a mortgage. The benefits of being a first-time homebuyer, even in this climate, include being able to qualify for state programs, tax breaks or federally backed loans. Statista found that first-time homebuyers account for 31 percent of buyers in 2020, down from 33 percent in 2019.
According to NerdWallet’s 2020 Homebuyer Report, 39 percent of those who planned to buy a home in 2020 postponed due to the pandemic. The survey also found that 26 million respondents plan to be first-time homebuyers within the next five years.
Similarly, ACCC’s Financial Health Index for the First Quarter of 2021 found that more than a quarter of respondents (27 percent) said they had been saving for a larger purchase, such as buying a home, when coronavirus disrupted life around the world. They survey also found that 60 percent of respondents’ financial goals have changed, with 24 percent of respondents saying that a key financial goal now is to simply keep up with monthly expenses.
In January 2020, the average interest rate for a 30-year fixed loan was 3.62 percent. In comparison, the average interest rate in January 2021 was 2.74 percent. Today, the average interest rate for a 30-year fixed mortgage is 3.12 percent, according to Forbes. Although interest rates are still low, prices have skyrocketed, and inventory has been scarce. Competition for homes in the most highly desired communities and neighborhoods is fierce. Nationally, inventory was down 23 percent in 2020. With fewer homes on the market, sellers are getting an abundance of offers, many significantly over asking, and closing at a fast rate.
“The pandemic has caused consumers to re-evaluate their living situation,” said Katie Ross, Executive Vice President at American Consumer Credit Counseling. “With the work from home lifestyle, consumers have decided they need more space or want dedicated rooms for them to work in. Others have realized since they can work from anywhere, why not buy a second home.”
ACCC explains necessary advice consumers should utilize before buying a home:
- Check your credit – First-time homebuyers need to focus on making their credit score as strong as possible. Consumers can qualify for the lowest interest rates with a credit score of 760 or higher.
- Budget – It is vital that consumers know their limits when it comes to buying a home. Don’t forget about expenses that come with buying a home, such as moving costs, property tax, possible HOA fees and other expenses. Consumers should use a How Much House Can I Afford calculator to assess their finances.
- Complete a pre-purchase homebuyer education class – This course walks homebuyers through different types of loans that may be available to them. Programs such as Framework qualify for most local and national lenders.
- Save – Twenty percent is the suggested amount consumers should put down. The more money consumers are able to put down, the more attractive they are to lenders.
About American Consumer Credit Counseling
American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt management, bankruptcy counseling, housing counseling, student loan counseling, and financial education concerning debt solutions. To help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loan assistance, youth and money, homeownership, identity theft, senior living, and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). For more information or to access free financial education resources, log on to ConsumerCredit.com or visit http://www.consumercredit.com/financial-education.aspx