The first-time buyer has some characteristics different from the market as a whole. Based on data from the January to June 2013 REALTORS® Confidence Index surveys, 91percent of first-time buyers purchased their home using a mortgage. The median FICO score for first –time buyers was 720. In comparison, the 60 percent of repeat buyers using a mortgage had FICO scores of 750.
When it came to down-payments, 46 percent of first time buyers had down-payments of 3-6 percent, compared to the 46 percent of repeat buyers who put down more than 20 percent. Many investors, second-home buyers, and international buyers also paid cash. In short, the numbers confirm that the first-time buyer is much more dependent on the credit markets than is the case for other buyers—and in recent years has also faced significant issues as regards student loan balances.
What Does This Mean to REALTORS®?
The first-time buyer is generally financially less prepared to buy a house than is the case for other types of buyers. In many cases first-time buyers also need assistance in defining the necessary trade-offs in finding a home in a specific price range. Finally, first-time buyers are typically inexperienced with the complex regulatory and legal procedures associated with the purchase decision. There are reasons why first-time buyers are currently lagging in market share—they face a lot of challenges.
In addressing the buying needs of first-time buyers the challenge is helping them understand the financial practicalities associated with the home purchase decision, and the need to be prepared to move quickly in inventory limited markets.