Buying a home for the first time can be an exciting and satisfying experience. No more paying rent, dealing with loud, obnoxious upstairs neighbors, hauling laundry to the laundromat, or waiting days for the maintenance man to fix the leaking ceiling.
But that excitement can quickly turn to frustration for your clients looking to buy their first home. Since it’s their first rodeo, they don’t understand that the home buying process is an exercise in patience, persistence, and paperwork (lots of it). As their realtor, you can help make their first home-buying experience a great one by setting realistic expectations, explaining how the process works, and encouraging them along the way.
Here are some specific ways you can help first-time homebuyers get the most out of their experience and help alleviate any stress or anxiety they may have during their home-buying journey:
Explain the Homebuying Process
You’re the professional. You know the home-buying process like the back of your hand. But it’s important to remember that your clients, especially your first-time buyers, probably don’t understand how it works. And that uncertainty can tarnish what should be an enjoyable and exciting experience.
To put your clients’ minds at ease, schedule time to explain the entire home buying process to them. Ensure they know it’s not as simple as finding a house, making an offer, and moving in. The journey can be a roller coaster of emotions and can sometimes take many months.
Give your first-timer a detailed description and timeline of the process to provide a clear understanding — from getting a loan pre-approval to selecting a realtor (they’re already off to a great start by choosing you), to creating a realistic list of needs and wants in a house, to viewing homes and making an offer. Don’t forget to talk to them about inspections, purchase agreement details, select a title company, and the closing process.
Help them understand the process and realize that buying a home is more of a marathon than a sprint. That will help them have realistic expectations and be more willing to trust you during the process.
Be Their Paper Boy or Girl
A real estate transaction requires a fair amount of paperwork. In addition to the initial offer, your first-time buyer will likely deal with counteroffers, addendums, lists of issues with the property, home inspections, and getting estimates for improvements. An expert agent (like you) knows these things are coming and can guide first-time buyers through the mountain of necessary paperwork associated with these steps in the process.
Most first-time homebuyers are super nervous about signing any contract and documents because they have no idea what any of the language means. But you do. So, don’t be afraid to go through each form with them, even clause by clause, to make sure your client knows exactly what they are signing.
For many first-time buyers, this part of the process will be the most stressful, so if they feel like you’re willing to put in the extra time and patience to make sure they feel comfortable, they’ll appreciate you even more.
Stress the Benefits of Pre-approval
Many first-time homebuyers jump the gun and start looking for houses before they even know how expensive of a home they can afford. That’s a big mistake because it’s very possible they’d have their heart set on something that’s out of their league.
You can save them some grief by explaining that the very first thing they should do is go through the mortgage pre-approval process to get on the right path toward buying their first home. Knowing their financial situation and being realistic about the types of homes they can afford from the start will make house hunting easier.
If they aren’t sure about the advantages of getting pre-approved, here are a few you can outline for them:
- Powerful buyer: If buyers are pre-approved, sellers will see them as serious buyers because they are backed by a lender. It means the lender is comfortable with their financial background and is confident they can afford a particular house payment.
- Saves time: House hunting without knowing what a buyer can afford can be a waste of your time. Knowing how much house they can afford will help them focus on things like home features and location, rather than worrying whether the house is in their price range.
- Reduces surprises: If your buyer knows what they afford, then they’ll know what type of offers they can make. So they won’t be as disappointed if their competitive offer isn’t accepted.
- Better bargaining power: A pre-approval letter gives your client more negotiating power because sellers know that they’ve already talked to a lender. Sellers won’t have to wait for your client to “talk to the bank” between negotiations.
- Faster closing: The lenders already have your client’s information, which will speed up the overall approval process. The appraisal can be ordered sooner, and the process can move faster.
Help Them Understand Their Loan Options
Most first-time homebuyers don’t even understand the basics of home mortgages. All they know is that they can’t pay cash for their new home and need to borrow money from somewhere. You can be a massive help to them by explaining the basic types of mortgage loans and then referring them to a mortgage lender who can dig into their specific situation and fit them with an ideal loan for their situation.
To give them the basics, you can break down the loan options like this. But again, a pre-approval strategy meeting would be most beneficial:
- Conventional – A conventional mortgage is not associated with the VA or FHA. They are called conventional loans because they adhere to conventional standards within legal limits by mutual consent of the lender and borrower. It’s an option that generally requires at least 5% down on the loan amount but can be as low as 3% for some buyers.
- FHA loans – Federal Housing Administration (FHA) does not actually issue mortgage loans, but it provides mortgage insurance that protects lenders. Customers like FHA loans because they typically have a lower down payment requirement (as low as 3.5%), lower monthly insurance premiums, and often have lower closing costs. This makes an FHA loan a very attractive loan for first-time homebuyers.
- Renovation mortgage loans – A renovation mortgage allows the borrower to purchase a property and include renovations directly in the mortgage loan. This means your client pays for the remodeling, amortized right into a mortgage. That’s a lower interest rate than your typical credit card and a better term than a home equity loan. One of the most popular and diverse home improvement loans is the FHA 203k, which allows your client to make home improvements to the house they want or the home they already own. A 203k Rehabilitation Loan will enable borrowers to tear down an existing structure and build a new one using some of the existing foundation.
While all your clients lean on your experience and expertise when buying a home, first-time buyers especially need you. Following the tips above will go a long way in making sure they have a great first experience. And, it may help you earn a client for life.
Here are some additional resources you can direct first-time home buyer clients to help them prepare for their house hunting journey.
The Essential Guide to Buying Your First Home
A Concise Guide for The First Time Home Buyer
*Not all borrowers will qualify. Contact us for more information on fees and terms. Not intended as legal, financial, or investment advice. Contact your financial representative for more information.
Gassett, B. (2020, November 20). How agents can help first-time home buyers. Retrieved March 11, 2021, from https://magazine.realtor/sales-and-marketing/feature/article/2020/11/how-agents-can-help-first-time-home-buyers
Humanity, T. (n.d.). How to help prepare your first-time homebuyers for homeownership. Retrieved March 11, 2021, from https://www.tchabitat.org/blog/first-time-home-buyer-realtor