On July 15th Greater Sacramento Habitat Young Professionals put on a virtual lunchtime seminar in partnership with MetroEDGE to bring together experts in the Sacramento housing sector with advice for YPs on what to expect when thinking about buying their first home. The panel, part of Habitat Young Professional’s work to support Habitat for Humanity of Greater Sacramento’s vision of bringing people together to build a world where everyone (homeless, low-income, missing middle, and beyond) has a place to live, looked to go over the process, expectations, and financial picture behind buying a home to help demystify it for those who have yet to experience it.
Read on for a recap of lessons learned and how to get in touch with the experts!
Moderated by HYP President Erin Wood (Realtor with Carlile Realty)
Where to Begin
A common theme heard from all four panelists was this: Finding the perfect home (and the right loan structure to purchase that home) is a process as unique as you are. Variables such as how long you plan to stay in the neighborhood (most first homes are not a final destination, but a 3 – 7 year starter home), your commute, which schools are nearby, and more will contribute to finding a best fit.
So, the best first step? Shop around for a bank or lender to set up a buyer consultation. The right realtor or lender will sit down with you to talk about your needs, your future plans, your financial outlook, and what pitfalls to look out for – such as purchasing a home you can technically afford, but would leave you strapped for cash in all other areas – what Taylor Greer refers to as being “house broke” (you buy the home of your dreams, but cannot afford to go out for a celebratory dinner or host friends for a cocktail because you can barely afford your home).
Understanding your lifestyle variables will help find the right home for you. Even more important is finding the right home for the right price – when you know what you can afford, you can search for a home within the right parameters, and avoid the heartbreak of having to turn away from your dream home, if it is outside your price range.
Understanding your Borrowing Potential
As Kevin Cooper points out, your home and corresponding mortgage is the largest purchase you will ever make. To start exploring your financing options, you’ll want to get a few opinions and seek pre-approval for financing, to know where you stand and your borrowing potential. Similar to shopping around for a buyer consultation, whether you go with a bank or a broker will depend on your needs and any first-time-buyer assistance programs you may qualify for.
One of the largest factors in determining your financial qualification is your credit score, and generally speaking, a credit score over 700 will be your greatest strength for borrowing potential. Not sure where your credit stands? Our panelists recommend using a service like Credit Karma to get a general idea of your creditworthiness, and working with your loan officer to buff up your score, should you have any hits on your credit.
In addition to credit score, our panelists point out a few other factors which YPs may find affecting their ability to borrow, including income limitation for early-career borrowers, student loan debt, and job security amidst COVID-19 furloughs. One you’ve found the bank or lender you feel comfortable working with, they will help determine your individual financial picture, and any steps to take to increase your creditworthiness.
You Mentioned First-Time-Buyer Assistance Programs?
One of the most significant financial hurdles a home buyer will face is a down payment on a home, which can add up to tens of thousands of dollars. However, a wealth of programs are available to first time home buyers to assist with down payment or closing costs, including two shared by Jerri Johnson which are offered by Bank of America to low- and moderate-income earners.
The Bank of America Down Payment Grant Program offers a grant equaling 3% of the home purchase price, up to $10,000, to be used for a down payment in select markets, and the Bank of America America’s Home Grant offers a lender credit of up to $7,500 that can be used towards non-recurring closing costs, like title insurance and recording fees, or to permanently buy down the interest rate.
In addition to private lending programs such as those above, first time home buyers may also qualify for government grants such as the Down Payment Assistance Program offered by the California Housing Finance Agency (CalHFA), which offers a deferred-payment loan of an amount up to the lesser of 3.5% of the purchase price or appraised value, to assist with down payment and/or closing costs, with a cap of $10,000.
Your loan officer can help you navigate first-time-buyer programs and which you may qualify for based on your income and credit – be sure to do your research to understand the commitment required of you as the borrower. Some grants, as Jerri says “do not have to be paid back, and are therefore truly a gift,” whereas other programs may come with a silent second loan, which is deferred but required to be paid off upon sale of the home.
The lesson echoed by all panelists? Even if you were pre-qualified for a loan or assistance program in the last 6 months, check again, because the shifting economic landscape amidst COVID-19 could affect your qualification. And, if you don’t qualify for one program, you very likely qualify for another.
Looking for the Right Home
You’ve taken all your first steps – found a great realtor you enjoy working with who understands your needs, determined your creditworthiness and therefore the amount you can borrow, and found any assistance programs you qualify for. So what happens next? Finding a home that fits your lifestyle and your budget!
Your real estate agent will find options based on the needs you discussed – location, nearby schools, must-have features, and your preference for buying new or resale. There are pros and cons to buying a new home or a resale home.
Katherine Bardis shared that a new home can be a great fit for first time homebuyers because the home will come with a fit and finish warranty to correct any issues found within the first year, a ten year warranty on certain structural pieces, and peace of mind that all parts of the home are brand new. Buying a resale home can get you a better price, but also comes with potentially unknown issues with structure wear or pests.
During the process of finding your new home, one out-of-pocket expense you can expect is the cost of inspections, which Kevin Cooper shares can average about $400. Should you find a resale home you are extremely interested in, an inspection can help determine if there are any problems to address with the seller, such as foundation shifts, roof damage, electrical issues, and more.
When you’ve found a home you love, your real estate agent will help with putting in an offer and negotiating counter-offers. While negotiation can feel intimidating for first-time buyers, your real estate agent can walk you through the process. One interesting trend our panelists have seen during the COVID-19 pandemic is the tendency for buyers to put in a 100% home price on the first offer (rather than negotiating a lower price first).
Effects of COVID-19 on the Market
As COVID-19 related closures and layoffs began affecting homeowners, many lenders offered 90-day mortgage deferrals. As a result, keeping people in their homes (rather than foreclosing) has introduced fewer homes into the market. With lower home supply, prices are rising, rather than falling. However, our panelists are keen to watch any fluctuations as homeowners come up against those 90-day mortgage deferral deadlines.
At the same time, while average home prices are going up, interest rates are going down, from about 4% to about 2.75%. Lower rates increase a buyer’s total borrowing potential, and a buyer with moderate income may find that they their upper price range may increase from $300,000 to $400,000, for example. In addition, those staying home and saving money may find themselves able to prioritize saving for a down payment and achieving better loan offers than before, meaning they can seek higher priced homes.
According to our panelists, the Sacramento housing market is hot right now – homes are selling quickly, at higher prices than they would have before the pandemic, and buyers are negotiating less while quick to offer full price in order to secure the bid. Kevin Cooper offers this advice: “Don’t sell your kids’ souls to jump at a home right away. A new home will come onto the market tomorrow or next week.” In other words – be patient, and don’t let FOMO drive you to purchase a home that isn’t the best fit for you.
Ready to start your home buying journey? Have questions for one of our panelists? Here’s how to connect!
Jerri Johnson, Bank of America – email@example.com
Kevin Cooper, Cooper & Associates Realty – firstname.lastname@example.org
Taylor Greer, Carlile Realty – email@example.com
Katherine Bardis, Bardis Homes – Katherine@bardishomes.com
Jerri Johnson is a Community Lending Officer with Bank of America, and helps borrowers find a loan that fits their budget. With 16 years of experience, she has worked with clients looking for home loans of all kinds, including first time homebuyers, lower-to-moderate-income borrowers, and multicultural borrowers.
Kevin Cooper is the President and founder of Cooper & Associates Realty. In the 16 years since founding Cooper & Associates, Kevin has sold thousands of homes and helped hundreds of families buy and sell. He utilizes a unique eight-step process that yields highly predictable results where homes sell faster and for more money in experiences that can best be described as painless. Kevin believes in treating everyone with the highest level of respect, professionalism, and care, and he staffs his firm with the best area agents who conduct themselves in the same high standards that Kevin demands of himself.
Taylor Greer started out in the industry in the mid 2000’s as a mortgage broker, with roles as a founding member and executive for multiple different local brokerages. He established Carlile Realty & Lending and Carlile Investments, his current companies, that same year. This entrepreneurial experience awarded him an in-depth knowledge and well-rounded approach to the field of real estate, with an expertise for both the mortgage/loan process and the client focused side of home sales and purchases.
Katherine Bardis-Miry is the Co-Founder of Bardis Homes in Sacramento with her cousin, Rachel Bardis. She is also Co-Founder of Bardis & Miry Development with her husband, Bay Miry, and holds the role of Principal of Reynen & Bardis Homes. Katherine aims to bring obtainable for sale housing to the greater Sacramento area. Along with her work as a developer, Katherine is heavily involved in the advancement of Sacramento as a whole; sitting on a number of Boards, including The Crocker Art Museum and Capital Public Radio Board.
Interested in learning more about Habitat Young Professionals and how you can be a part of this group of change making young professionals working to build a stronger community? Email SacramentoHYP@gmail.com or click here to join HYP and become a member!