What Makes a First-Time Homebuyer?

So, do you really know who your first-time buyers are? Fannie and Freddie say anyone who hasn’t owned in the last three years is considered a first-time homebuyer. Your “first-time” buyer could be someone who has previously owned a home but moved around often for work, recently had a divorce, or has been living with a family member as a caregiver. Many circumstances could make someone who has owned a home before revert to first-time homebuyer status.

How does this definition change the way you work with them? There are a plethora of programs in place to help first-time homebuyers. It is your job as the loan officer (LO) to connect them with the right resources and make sure they are set up for success. You can only do this when you are tuned in to who your first-time homebuyers actually are.

How To Help

Let’s talk about those resources. There is a lot of material out there to help educate first-time homebuyers — be sure you are sharing it with them. The Consumer Financial Protection Bureau (CFPB) has great resources available to help first-time buyers prepare themselves for this huge financial commitment. Even if your buyer has previously owned a home, it is likely that the market, regulations, and technology have changed enough to where the process may feel very different for them this time than it did when they last purchased a home. Education remains important regardless of experience.

There also are programs in place to help first-time buyers with costs. For example, the agencies offer lower loan-level pricing adjustments (LLPAs) on certain program types and for borrowers at/or within area median income limits. Additionally, local housing finance agencies (HFAs) and nonprofits may have a first-time homebuyer program to help with down payments.It’s important for you, the LO, to know what is available to certain types of buyers so that you are able to connect them with the right resources early on.

Who They Aren’t

Knowing who your first-time homebuyers are not is just as important as knowing who they are. When working with first-time prospective buyers, you may notice that some just are not ready to buy yet — and that’s OK. Don’t write them off right away. Remember that a conversation may be deemed an application for some disclosure purposes, so stay vigilant in compliance efforts.

These buyers are still an opportunity. You can and should take the initiative to help them become ready to buy. First-time homebuyer resources can help them learn how to budget, build credit, and do whatever else is needed to get in a secure financial position to buy a home. Not every buyer will know where to start, but you can help them figure it out. They will remember how you took the time to help them and more than likely come back to you once they are ready to buy.

These buyers who are not yet ready also could be long-term referrals. Just because they cannot buy right now does not mean they don’t have friends or family that they can send your way. Especially if you are taking the time to work with them and prepare them for homeownership, this can build loyalty that ends in referrals for your business.

This National Homeownership Month — and every month — keep up with how your buyers are changing. Know who can be considered a good first-time buyer and who cannot. Knowing the type of buyer you’re working with ultimately helps you know exactly what resources they need and creates a better experience for everyone.