$80G down payment for first-time homebuyers? 4 tips to make your offer stand out.
An early fall open house in Westbury was hosted by Douglas Elliman. Credit: Tom Lambui
The median down payment among first-time homebuyers across the country is the highest its been in more than 35 years, according to data from the National Association of Realtors.
This year, median down payments reached 10% for first-timers and 19% for all buyers, the NAR's annual report showed.
These numbers do not surprise real estate professionals on Long Island, who have seen their clients make similar down payments throughout the year as a way to be competitive in a market characterized by low inventory, or to achieve a lower monthly mortgage payment.
There are other ways to stand out from the pack while house-hunting, these experts say. Here is their advice, and some of their experiences from the last year.
Tip No. 1: Consider the details
“It’s pretty competitive out there for anything that's reasonably priced and could be seen as move-in ready,” said Stephen Valentino, a real estate agent with Daniel Gale Sotheby’s International Realty in Smithtown. “And some people who can't qualify for more, might try to sweeten the pot with extra down at contract.”
As for the NAR findings, “for me particularly, most of my first-time homebuyers aren't putting down anything like that,” he said. “It’s really tough to come up with that if you’re young and on Long Island, looking to move out of your parents’ place."
For example, in October, the median single-family home sale price in Nassau County was $837,000, and $701,000 in Suffolk, according to OneKey MLS data. So a 10% down payment would total $83,700 and $70,100, respectively.
When Valentino represents buyers, he tries to touch base with listing agents to see what is most important to the seller — for instance, if they are looking for a quick move, or need a slower timeline in order to clean out the house, and whether his client can accommodate that. Then, he can include it in his buyers’ offer.
“Little things like that can end up going a long way,” Valentino said. “It’s the details of the deal; not necessarily always the top dollar.”
Tip No. 2: Show strength in your pre-approval
Bob Jacobsen is the president and CEO of South Shore Mortgage, based in Lindenhurst. The current lack of inventory is driving up down payments of prospective buyers — once a properly priced house hits the market, it will get flooded with offers, and the listing agent may determine the best one based on the highest down payment, he said.
But for buyers who cannot afford to be competitive with their down payment, Jacobsen advises them to establish “a good, strong pre-approval, showing strength in income and strength in credit scores.”
“The strength of the buyer is not based on their down payment; the strength of the buyer is based on their income assets, or credit and stability in the purchase,” he continued. “So I think in order to be competitive, they really need to outline that a little bit more.”
And sellers will be able to recognize that “if the price is right,” Jacobsen added.
Most importantly, in a market where house-hunting may take a while, “don’t get discouraged, and be persistent,” he said.
Tip No. 3: Plan your search in the offseason
Lena Koropey, a real estate agent with Daniel Gale Sotheby’s International Realty in Mattituck, has worked with first-time homebuyers whose down payments were 40%, “which is unprecedented,” she said.
Looking ahead to next year, “I think people will continue to want to put down as much as possible, to keep their monthly payments lower,” Koropey said.
And first-time homebuyers are prepared and motivated, she added: “They’ve taken certain measures, whether it’s how to save for their down payment or being strict about discretionary spending over time."
Now is a good time to start a home search, Koropey said, as the holidays approach and Long Islanders shift their focus to spending time with family and friends.
“It gives you a strategic advantage when the buying pool is smaller, so the sellers would be more open to negotiating at this time,” she said, “as opposed to when we have an influx of people, maybe during the spring season or summer. So the fall and winter seasons are a good time to buy.”
Tip No. 4: Look ahead to your ‘end game’
Between closing costs and a home maintenance fund, there is much more for first-time homebuyers to think about beyond down payments, said Jeffrey Segal, founder and president of Lighthouse Mortgage Corp. in Hauppauge.
“You’re moving into a house that may not be exactly to your liking,” Segal said. “You may need to buy furniture if you’re moving from an apartment, you might need to renovate some things. So I always ask my borrowers, ‘What’s your end game here?’”
Segal has seen homebuyers not being able to move in for months, “because they’re stripping the floors, changing the kitchen, and where's that money coming from?”
Having a lower monthly payment is important to first-time homebuyers, but he encourages clients to prioritize saving little by little, by keeping track of expenses and paying off credit card debt, if possible.
“You may not have this loan for the rest of your life, in an environment where rates start to come down,” Segal said. “You can take advantage of not putting as much money down and saving for two or three years.”
Rachel Weiss joined Newsday in 2016. As a real estate/living multimedia reporter, Rachel writes feature stories and contributes to and appears in on-camera video packages. She was the lead reporter on Newsday’s LI Acts of Kindness series.
