More than 60% of U.S. renters say they’d buy a home if their lease ended this month. But is March 2023 a good time to buy a home?
We think it is.
Our latest Homebuyer.com When Should I Buy A Home video shows:
- First-time home buyers are getting discounts as mortgage rates climb
- Home values avoided a crash and are starting to climb again
- Home sellers are giving in to home buyer demands
This article reviews the March 2023 housing market for first-time buyers and supports why now is a good time to buy your first home and pre-approve your mortgage.
First-Time Home Buyers Shielded From Rise In Mortgage Rates
According to Mortgage News Daily, March 2023 begins with 30-year, fixed-rate conventional mortgage rates averaging 6.85 percent.
Four weeks ago, 30-year mortgage rates were under six percent.
The rapid run-up reminds us that rates are unpredictable. Payments are up nine percent monthly for a first-time buyer. It changes how much home you can afford to buy.
Thankfully, the government is getting involved.
First-time buyers got an assist last month from a federal agency intent on making homeownership affordable and attainable.
February 23, 2023, the Federal Housing Administration announced a plan to reduce annual mortgage insurance premiums (FHA MIP) by 0.30 percentage points, which lowers monthly payments for FHA-backed homeowners by $300 per year for every $100,000 borrowed.
It’s the first FHA MIP reduction in more than eight years and the third government intervention to help first-time buyers in the last ninety days.
In December 2022, the government introduced new rules that reduced mortgage rates for low- and moderate-income home buyers by up to 1.75 percentage points. Then, in January 2023, it introduced rules that lower interest rates on low-down payment mortgages.
Mortgage rates are higher from the start of the year for the general home-buying public. For many first-time buyers, however, overall rates are down.
Home Values Are Starting To Climb Again
The U.S. housing market isn’t heading to a crash, and signals suggest that a home price recovery is underway.
According to real estate data company Altos Research, March 2023 begins with just 429,000 single-family homes for sale, marking the tightest home inventory since last June.
The National Association of REALTORS® also reports low home inventory.
In its most recent Existing Home Sales report, the real estate trade group shows the national housing supply at 2.9 months, which means at the current sales pace for homes, every residential property for sale would get sold by late May.
When the home supply is less than six months, prices tend to climb.
Home prices are also getting pressure from a new wave of buyers.
Homebuyer.com data shows a 15.4 percent jump in first-time home buyer mortgage applications in February compared to the prior month, and search traffic for first-time home buyer queries such as “first-time home buyer programs” and “what credit score do you need to buy a house” are up by similar amounts.
Data points like these are the hallmarks of healthy, expanding markets.
Sellers Are “Throwing Money” At Buyers Right Now
A third reason why March 2023 is a good time to buy a home, to borrow a phrase from Axios, is “sellers are throwing money at buyers right now.”
A sample of real estate contracts shows 42% of home sellers gave concessions to buyers recently, including money for home repairs, closing costs, and mortgage rate buydowns.
Another thirty-one percent lowered their home’s sale price to make their homes more affordable to prospective buyers.
Today’s home sellers behave like they’ve lost their leverage over buyers. Data suggests they haven’t.
- The supply of homes is down
- The demand for homes is up
- Rising mortgage rates create urgency
The current housing climate represents a home-buying opportunity. Buyers can make demands of sellers and have those demands get met. Buyers will keep their market advantage between now and mid-April and get homes at lower, affordable prices.
Conventional Mortgage Rate Discounts For First-Time Buyers
In December 2022, the FHFA instituted automatic mortgage rate discounts for low- and moderate-income first-time home buyers.
Through its First-Time Home Buyer Mortgage Rate Discount, the parent agency of conventional mortgage backers Fannie Mae and Freddie Mac made buying your first home more attainable and affordable.
The discount program changes the math of “Should I rent or buy a home?”
The FHFA’s program applies to single-family homes, condos, townhomes, and multi-unit properties. Qualified buyers get mortgage rate discounts of up to 1.75 percentage points off their mortgage rate.
No additional documentation is required, and the discount is automatic.
It’s also temporary – another reason why March 2023 is a good time to buy a home. Once the FHFA mortgage rate discount program is done, interest rates increase.
How To Buy A Home With A Small Down Payment
For many first-time home buyers, homeownership can’t wait.
Whether interest rates are high, home supply is too low, or there needs to be more money saved in the bank – it doesn’t matter.
The time to buy a home is now.
Thankfully, first-time buyers can achieve their American Dream of homeownership without saving 20 percent for a down payment.
Buyers can apply for low-down-payment and no-down-payment mortgages through online and offline mortgage lenders and down payment assistance programs through local housing offices.
Getting a mortgage approved with less than twenty percent down is getting easier.
In the last 18 months, mortgage lenders lowered minimum credit score requirements for FHA, USDA, and VA mortgages. Congress also stepped in to assist.
Last year, it passed a law that changes how medical debt and credit scores work, which raises FICO credit scores by an average of 22 points. Home buyers with higher credit scores get access to lower mortgage rates and have a higher mortgage approval rate.
Congress is also discussing affordable housing bills for first-time buyers programs, including home buyer tax credits, down payment assistance and cash grants, and other purchase incentives.
Buying A Home In 2023
March 2023 is a good time to buy your first home. Our advice for today’s home buyers is three-fold.
First, get a mortgage pre-approval.
Mortgage pre-approvals use today’s rates to tell you how much home you can afford and set realistic boundaries for your home search.
Every successful purchase starts with a good pre-approval. It’s never too early to get one.
Second, add points to your credit score.
Review your credit report for errors and supplement your monthly bill-paying with a credit-building service such as StellarFi that can work in as few as 30 days.
Third, use the HUD website to research down payment assistance programs in your area. Some programs may have been discontinued or defunded in the new year, so call the local provider to verify availability.
Source: homebuyer.com ~ By Dan Green ~ Image: Canva Pro
