First-time home buyers have increased their budget to an average of $238,935 – up from $193,197 in 2014 – according to the BMO Harris 2015 First-Time Home Buyers Report recently released.
This represents an increase of 24 percent over the past year. The average down payment percentage now stands at 13 percent, down from the average 16 percent in 2014.
The report also found that first-time home buyers are:
Making more cutbacks to their lifestyle to save for a home: the majority of first-timers (77 percent) say they have made cutbacks, more than reported cutting back in 2014 (72 percent)
More aggressive than experienced buyers: over half (52 percent) of first-time buyers are willing to enter into a bidding war and make an offer over the asking price to get the home they want, versus almost half (47 percent) of likely buyers
Expect help from relatives in purchasing their first home: one quarter (26 percent) expect parents or other relatives to help them pay for their first home
“This year, easier credit standards and stronger income growth should encourage more Millennials (age 18 – 34) to take the plunge, giving the housing recovery more punch,” said Sal Guatieri, Senior Economist, BMO Capital Markets.
“To help ensure first-time buyers don’t spend beyond their means, they need to be fully prepared to purchase the right house, at the right price,” said Kevin Christopher, Head of Mortgage Sales, BMO Harris Bank. “Getting pre-qualified gives buyers the opportunity to consider multiple options with confidence, during a time-sensitive decision period.”
The report also found that many buyers are thinking ahead before shopping for their first home. While only one in ten (13 percent) are preapproved for a mortgage, over three quarters (78 percent) are planning to be preapproved before seriously searching.
“Buying a home is one of the most important financial decisions you can make, and building a significant down payment is a big part of that journey,” said Mr. Christopher.
“BMO Harris Bank can help manage this process by developing a budgeting plan that will save time and money in the long term on all aspects of home buying and prepare you for the financial commitment.”