The housing market in McKinney, similar to national trends, has seen a significant dip in affordable entry-level housing since 2011, making it difficult for first time homebuyers to make the jump into homeownership. Compounding the issue are low inventory, rising home prices and high interest rates.
However, McKinney-based Realtors serving the Collin County area say not to be discouraged, as the current market offers a unique opportunity for first-time buyers.
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“Despite what it looks like on the outside, this is an excellent market for buyers wanting to start their journey of home ownership,” said Mike Danielson, a Realtor with Keller Williams in McKinney. “Prices are still a bit inflated from the recent COVID craziness and the 2-3% increase in interest rates we had the past few years, but even though we are seeing higher than normal prices sticking around, with the amount of time homes are sitting on the market, it gives good Realtors a real chance at negotiating a great deal for their clients.”
The Dallas Morning News spoke to five McKinney-based Realtors to hear their tips for first-time buyers as they navigate a changing market. Here’s what they had to say:
1. Key things to establish before you start the search
Before first-time buyers take to the market, Ali Rabeeah, with Coldwell Banker Apex, Realtors in McKinney and Sharon Rehders with Keller Williams in McKinney offered a few tips for a smoother process.
Buyers should consider their down payment, monthly mortgage payments, closing costs and ongoing homeownership expenses when determining their budget, and get pre-approved for a mortgage through obtaining a pre-approval letter from a reputable lender before starting the house hunt, Rabeeah said.
“This will give you a clear idea of how much you can afford and strengthen your position as a serious buyer when making an offer,” he said.
Rehders highlighted the importance of having not only good credit, but also a low debt-to-income ratio at 5% or lower, if a buyer wants to be approved for a higher mortgage.
2. Look for homes that have been on the market longer, be flexible
For first-time buyers, starting the search with an open mind and patience is key. Realtors suggest looking for homes that have been on the market for a longer period of time, considering new builds and being open to various locations.
Looking for homes that have been on the market for longer periods of time can give your Realtor the opportunity to negotiate more when it comes to seller concessions, Danielson said, noting not to be afraid to come in with a lower offer price on such homes.
“Homes are sitting for so long nowadays, that lower offer prices are getting accepted much more frequently,” he said.
Flexibility is also key for first-time buyers. Rehders suggested being open to location while Realtor Rebecca Valera, who specializes in the DFW Metroplex, pointed to considering new construction as an option.
With new constructs, builders often offer incentives to buy down the rate temporarily, or even on a more permanent basis, and there is always room for negotiations, especially on inventory homes that are already completed, Valera said.
3. Navigating high interest rates: Refinancing is always an option
Danielson said not to be afraid of the high prices and interest rates.
“If you get a home at a lower price today, you can refinance the rate later if it comes down a bit,” he said. “The interest rate on paying rent is 100%. Let that sink in.”
Rehders echoed this sentiment, noting that homeownership often saves more than renting and earns the homeowner equity that they can use in the future.
“You are marrying the home, not the rate,” she said. “You can buy now, and refinance later when the interest rates decrease. In the long run, you will have saved yourself thousands of dollars.”
4. How to decide if it’s a good time to buy
However, when considering if it’s a good time to buy, Jared Tye Real Estate Broker and owner of Tye Realty Group, said he asks potential home buyers two questions to help them make an informed decision: Are they comfortable with the mortgage payment despite recent rate increases? And how long do they intend to be in the home and the area?
“The last thing we want is for them to not have enough money at the end of the month to pay other bills or to put food on the table,” Tye said. And, to his second point, “If someone buys a house and they get a job transfer a year from now, they could actually lose money. Real estate has performed very well historically, but it’s not guaranteed. There’s always a possibility that you could lose money on a short-term homeownership.”
Ultimately, assessing the home’s potential for growth and resale value to ensure it aligns with the buyer’s long-term goals is an important step and can help narrow the search, Rabeeah said.
5. Utilize programs to bring down that closing cost
Asking for seller concessions to go toward closing costs is not something to skip, Danielson said.
“These concessions can be used to buy down their rate through programs like 2/1 Rate Buy Downs or even purchasing points towards lowering their rate for the life of the loan,” he said. “This can save the buyer thousands of dollars in the long run.”
Utilizing down payment assistance programs or forgivable bonds from different city programs can also help the buyer pay less at closing. Using these programs in conjunction with seller concessions can actually get clients’ some money back at closing, Danielson said.
Other first-time home buyer programs through the Texas State Affordable Housing Corporation, FHA loans, different buy-down programs and VA Loans for veterans can also help bring down costs.