What first-time homebuyers need to know.
The past few years have been especially challenging for first-time homebuyers. Recently, the Jefferson City Area Board of REALTORS reported that the average sales price for a home has nearly doubled within 10 years. In 2015, the average price for a home was $151,000, but average sales prices climbed to an impressive $295,000 during the summer of 2024. This price increase reflects the perfect storm of historically low interest rates, strong buyer demand, a limited supply of homes in 2020, and buyers from out of state flocking to Central Missouri, often paying cash and outbidding local buyers. As a result, buyers often find themselves in bidding wars, with many having to consider waiving contingencies — such as inspections, appraisals, and financing — to stay competitive.
However, first-time buyers do have some advantages over those who have to sell their current home while purchasing a new one. First-timers typically face fewer logistical challenges as they likely live with family or rent, allowing them more flexibility in timing their purchase. While selling before buying can be manageable, it requires careful planning and balancing priorities, which adds complexity for homeowners who are looking to upgrade.
These days, most people begin looking at homes online through real estate portals, using multiple platforms to compare listings, but there’s more than just the listing price to consider when deciding what one can afford. To begin, buyers should establish a budget that accounts for non-credit-related expenses, as lenders will evaluate only monthly debt commitments showing up in a credit report and will not budget for things like travel, day care, everyday shopping, etc. In addition to the monthly mortgage payment, utilities, maintenance, and unexpected costs should also be factored in when comparing homes.
Once a budget is set, a local lender can help home buyers explore all financing options and will be familiar with the specifics of the market. If eligible, some first-time homebuyers may receive special benefits like lower down payments, reduced closing costs, assistance with down payment grants, and access to specific mortgage programs with potentially lower interest rates.
“It’s important not to feel rushed, but it’s equally critical to be prepared to act quickly when finding the perfect home.”
-Beth McGeorge
Local lenders can help weigh the pros and cons of different loan types and find one that best suits each financial situation and long-term goals.
Finding a reputable and trusted real estate agent is essential. While agents are experts in finding homes just as they hit the market, buyers must be clear about what their must-haves and non-negotiable features are that make a home the right fit; this will make the process much smoother. Remaining flexible on things that can be changed over time will help buyers with budgeting. For example, it’s far easier to replace countertops than it is to install new cabinets.
When making an offer on a home, the seller will either accept, reject, or counter the offer to reach an agreement on the price and terms of the sale. One should be ready when the opportunity to purchase arises. It’s important not to feel rushed, but it’s equally critical to be prepared to act quickly when finding the perfect home. In a competitive market, being well-positioned to move fast can be the difference between securing a dream home and missing out. It’s also important to know what funds are required to close. Closing costs can include fees related to applying for a loan, finalizing the sale, the mortgage lender’s services, paperwork, taxes, insurance, record filing, etc.
Buying a home is one of the most important financial decisions a person can make. Homeownership provides a pathway to building wealth and financial security. While the market may seem intimidating, taking the right steps and working with experienced professionals can make the process manageable and rewarding.