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What First Time Homebuyers Need to Know in 20163.28.2016

At Mortgage Options Inc., we love working with first time home buyers! As part of our job, we keep up with industry trends so that we can better inform our home buyers and provide the best mortgage products for the current climate. 

Trends for the past five years are just coming out and we’re seeing big differences in how people purchase homes compared to previous decades. This year’s first time home buyers are millennials who face their own unique set of challenges. First, millennials are waiting longer to start families. While this is all well and good, the combined buying power of a married couple far exceeds that of a single person, which means many young people are staying in the rental market for longer. Millennials are also carrying the added burden of historically high student debt. This debt ratio hampers their ability to afford a mortgage payment and makes getting into their first home even more difficult.

For those who are not struggling with student debt and are ready to buy their first home, we have a new problem of low housing inventory. Many think this is due to a slower rate of new home construction, but it turns out that’s not the case. Housing inventory becomes available when people move up from their current home to a larger home to accommodate growing families and increased wealth. What we’re seeing is that the gap between mid-priced homes and premium homes is growing year-on-year, preventing people from trading up and freeing up the mid-priced homes for those in “starter units”. For example, the median list price of a premium home across the USA is $542,805, compared to $267,845 for a mid-priced home. That gap is 17.3% higher than it was in 2012 and there is no sign of this changing – unfortunately, there is the increasing wealth gap that has seen the incomes of the top third of U.S. households climb more dramatically than those in the middle third and this has pushed up premium homes prices.

What about starter homes in the sub-$200k range? 2011 saw investors snatch up these units and use them as rental properties as rental prices soar. Nearly a third of starter homes were owned by investors in 2014, the latest data available, up from 27% in 2005. For other starter units, about a quarter of these homeowners are underwater, meaning they owe more on their mortgages than their homes are worth. That share has fallen in the housing recovery but is above the 13% average for all homeowners. That effectively prevents those owners from selling until prices recover.[1]

What Can I Do as a First Time Home Buyer? 

Although the outlook is bleak, it is by no means impossible to buy your first home. With the help of real estate professionals and Mortgage Options Inc., we know we can get you into your first home in South Carolina or North Carolina.

Why would you want to buy a home over renting? As rental prices soar, many times a mortgage payment would be the same, if not less, than your monthly rent. Fortune Magazine predicts that rents could rise by 8% in 2016 and many people are already forking out over half of their income for rent. [2] For many, this makes renting unaffordable, but even if you can afford the rent increase, your monthly payments are contributing only to your landlord’s net worth. When you make a monthly mortgage payment, you’re contributing to your own net worth. Predictions show that in 2016, a homeowner’s net worth will be 45 times greater than that of a renter. [3] Wouldn’t you rather contribute to your own financial security rather than your landlord’s?

At Mortgage Options, Inc. we have many loan programs that work well for first time home buyers. These include:

  • VA Loans – perfect for serving military personnel, reservists and National Guard – low interest rates and no down payment required in most cases
  • USDA Rural Housing Loans – works very well in North Carolina and South Carolina where many properties are considered rural – no down payment required
  • FHA Loans – low down payment options, take advantage of today’s low interest rates
  • HomeReady Loans – new loan program from Fannie Mae that was created to help meet the diverse needs of today’s home buyers

Mortgage Options Inc. has many loan programs that can work for a variety of first time home buyers. We encourage you to contact us to discuss your mortgage options – it doesn’t cost you a thing to talk to us about mortgage programs. If you are buying your first home in North Carolina or South Carolina, call Mortgage Options, Inc. today at 803-732-5787.



[1] Blame owners, not builders, for housing crunch, USA Today, March 21, 2016 http://www.usatoday.com/story/money/2016/03/21/blame-owners-not-builders-housing-crunch/81990336/

[2] Why rents could rise by 8% in 2016,  Fortune, October 7, 2015 http://fortune.com/2015/10/07/rents-rise-housing/?iid=sr-link1

[3] 2016: Homeowner’s Net Worth Will Be 45x Greater Than a Renter  Keeping Current Matters, October 26, 2016 http://www.keepingcurrentmatters.com/2015/10/26/2016-homeowners-net-worth-will-be-45x-greater-than-a-renter/