The purchase of a first home is a major life milestone, and often the biggest purchase one makes in their lifetime. The process is not only stressful, but fraught with decisions that are tied to financial outcomes, which are as fluid as the trends and rates dictating the Phoenix housing market. I am a licensed REALTOR® with RE/MAX Fine Properties offering four essential tips for first-time homebuyers in 2024 to alleviate uncertainty while navigating the twists and turns of the homebuying journey, as well as advice for identifying opportunities to score a home within one’s budget.
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Opt for the ‘fixer-upper’
When I use the term ‘fixer-upper’ I’m not referring to a tear-down property, but rather an older home that may require renovations. Looking past flaws, fixer-uppers are an excellent opportunity to build equity through renovations made over time. I recommend that homebuyers improve one room at a time over the course of several years, and through these steady improvements, bolster the value of their home to rival or even supersede their newer counterparts. Fixer-uppers also tend to be less competitive than a move-in ready home, making them less prone to bidding wars, which can see buyers impulsively offering above their intended budget.
Additionally, the lower price point of fixer-upper homes can be an advantage for homebuyers who might otherwise be priced out of a desired community. Factors such as ease of access to schools providing quality education, proximity to retail and shortening one’s work commute may be important to a first-time homebuyer and influence their choice of home. For these buyers, purchasing a fixer-upper can ultimately support their lifestyle, a valuable consideration when evaluating interest rates and one’s budget. Which brings me to my next tip:
Determine your budget and get pre-approved for a mortgage
Budgeting is important, and first-time homebuyers need to consider all aspects of purchasing a home beyond one’s initial down payment and mortgage. This is especially true for first-time homebuyers who have only lived in rentals, and therefore have not considered the totality of costs associated with owning a home. Is your income and lifestyle sustainable for living in a home for an extended period? To really gauge what factors into one’s budget, I recommend that homebuyers do research on how expensive a property’s HOA dues are if their property is part of one and consider the cost of utilities and regular upkeep on the property. If the home requires repairs on ‘big ticket’ facilities like a water heater, roof or air conditioning unit, your agent can connect you with trusted contractors who can provide a quote on costs to repair. Another asset that first-time homebuyers often overlook is the presence of solar panels on a property. Oftentimes, these solar panels might not be fully paid off by the previous homeowner, leading unsuspecting buyers to assume debt (which can have a negative effect on a person’s debt to income ratio when speaking with lenders.) While many paid-off solar panels may also be covered under warranty, a warranty does not encompass the regular maintenance costs associated with their upkeep.
Pre-approval for a mortgage is a critical step in the buying process right now, and this means shopping around with lenders for a rate before scoping out houses altogether. I recommend that buyers stay on top of conversations with lenders, and to not become discouraged if they receive an underwhelming rate. The qualifications and guidelines that lenders use when calculating one’s access to a loan amount, so take time to meet with several and gauge your options. There are also different capacities to secure pre-approval for a loan, including building out a reliable credit history (a crucial step for a first-time homebuyer.) This can be as simple as opening up a basic credit card and paying it off over a period of 60 days.
Buy down interest rates with seller concessions
A recent seller’s report found that an estimated 70% of homes in Phoenix are selling with seller concessions, and this trend is predicted to continue well into 2024. Despite housing inventory being low, homebuyers will have power as interest rates cool in 2024.
The concept of buying down rates with seller concessions isn’t new – this practice was common during the market crisis of 2008, in which seller concessions incentivized hesitant spenders to purchase homes during a period of financial instability and rate volatility. Buy-downs on properties are contingent to the loan a buyer is pre-approved for, as well as what the loss the seller is willing to accept. Different types of loans have different ‘caps’ on concessions – for example, a buyer utilizing an FHA loan can receive upwards of 6% in seller concessions, whereas conventional loans typically cut off at 3%. These limits should be accounted for when structuring an offer to a lender.
Identify a realtor advocate
The real estate market is constantly shifting, and keeping up with its ever-changing rates and trends is as time-consuming as it is confusing. Working with a highly knowledgeable realtor ensures the best interest (and budget) of the homebuyer are prioritized throughout the purchase process. Realtors exceed at guiding homebuyers to prioritize their spending, can connect buyers with their trusted rolodex of contractors for renovations, and can also identify factors of a property that could contribute to buying down a home’s price.
Author: Heidi Majidi is an associate at RE/MAX Fine Properties. RE/MAX Fine Properties is a locally owned and operated full-service real estate brokerage with offices across Arizona. Founded in 2008, the brokerage has more than 300 REALTORS® and specializes in both residential and commercial real estate. RE/MAX Fine Properties is a proud supporter of Children’s Miracle Network Hospitals®, Susan G. Komen®, and other charities, and is headquartered at 21020 N. Pima Rd. in Scottsdale, Ariz. To learn more, please visit www.fineprop.com.
