Raising the necessary cash for a down payment is the toughest hurdle first time Gulf Shores home buyers face on the road to home ownership. For many, government programs like FHA, USDA Rural Development guaranteed loans, VA loans and down payment assistance programs sponsored by state and local housing authorities have made a big difference.
Yet requirements by lenders in the wake of the QM Rule and overall tighter loan-to-value ratio standards are taking their toll. Average down payments are rising again, making it tougher for millennials who may face student loans and other financial hurdles.
First Time Gulf Shores Home Buyers Have Less Down Payment
Fewer first time Gulf Shores home buyers are putting up larger down payments, according to the latest Realtor Confidence survey. About 60 percent of first time Gulf Shores home buyers put down 6 percent or less compared to about 74 percent in 2009. It's a known fact that buyers who pay cash or put down large down payments generally win against those offering lower down payments. For buyers with sufficient financial resources, a higher down payment also means saving on mortgage insurance premium payments.
Down payments have already increased from last year when the average for first time Gulf Shores home buyers was 5 percent versus 14 percent for repeat buyers, according to NAR's Profile of Home Buyers and Sellers.
Last year first time Gulf Shores home buyers used a variety of resources for the loan down payment: 78 percent tapped into savings; 27 percent received a gift from a friend or relative, usually from their parents; and 7 percent received a loan from a relative or friend. Nine percent sold stocks or bonds and 8 percent tapped into a 401(k) fund. Among entry-level buyers who said that saving for a down payment was difficult, 54 percent said student loan expenses delayed savings.
As down payment requirements rise, the first-timer market share shrinks. In March, approximately 30 percent of Realtors reported a sale to a first time home buyer. Typically, first time buyers account for about 40 percent of all homebuyers based on data from NAR's Profile of Home Buyers and Sellers.
First time Gulf Shores home buyers are ahead of the game by calling us or filling out our contact form to help them find their first home.
Find more tips for Gulf Shores home buyers by clicking on our Gulf Shores Home Buying Tips link to the right under Gulf Shores Real Estate Categories.