First-time homebuyers may have to compromise

Richard and Susan Mallek, right, are first time homebuyers who expect to close on their new Boynton Beach home at the end of the month. Before the couple, who now live in Delray Beach, Fla., began their search last summer, they studied a homeowner's guide to buying real estate.

FORT LAUDERDALE, Fla. -- After about six months of looking, Richard Mallek and his wife, Susan, are ready to close on their first home, a three-bedroom sanctuary with old Florida charm in Boynton Beach, Fla.

Before the couple began their search last summer, they paged through “The Insider’s Guide to Home Buying,” a book written by the Zuckerman family, which owns a Coconut Creek, Fla.-based real estate company.

“It opened our eyes about what we were getting into,” said Richard Mallek, 32. “We found out the closing costs could be just as much as the down payment. So we buckled down, cutting back on going out to dinner and for drinks.”

First-time buyers like the Malleks gradually are playing a larger role in rejuvenating the housing market. First-timers boost demand, which allows existing homeowners to sell and move up to bigger properties.

For the 12-month period ending in June, 2012, 39 percent of sales nationwide involved first-time buyers, compared with 37 percent a year earlier, according to the National Association of Realtors.

Five years ago, in the middle of the housing bust, first-time buyers had a glut of properties to choose from, little competition, and plenty of leverage when it came time to submitting offers.

Not anymore. The housing inventory is down sharply, investors are pouring money back into real estate, and sellers are eager to accept those cash deals.

Brokers insist that buyers get pre-approved for a specific amount of money before starting their search. When a home in their price range hits the market, they should plan to see it that day — on their lunch break, if necessary — and offer full price or above in many cases.

Here are other strategies that first-time buyers can use to their advantage:

(PLUG)Broaden the search, even just a little. Many first-time buyers target a specific city, but the lack of inventory limits options, agents say. Buyers “have to be flexible and compromise,” Broward County, Fla., agent Chip Rowand said.

(PLUG)Don’t automatically settle for a Federal Housing Administration mortgage. Many first-time buyers lean toward FHA loans because of the low down payments — just 3.5 percent of the purchase price.

But in today’s market, sellers fielding multiple offers prefer cash or conventional loans, which usually don’t have as many restrictions as FHA, said Stephen B. McWilliam, president of Greater Fort Lauderdale (Fla.) Realtors.

For clients who need financing, Mr. McWilliam recommends conventional loans that require just 5 percent down. They’ll be viewed by sellers as more financially stable and even save money on mortgage insurance costs, he said.

(PLUG)Seek a lender that can process the loan quickly. Mr. McWilliam said some big banks won’t sign off on mortgages for eight to 12 weeks — too long for most impatient sellers. Consider working with a community bank or a local mortgage banker, which typically don’t have as much bureaucracy.

“If we have to do it in eight business days, we will,” said Jim Flood, regional manager of Supreme Lending in Plantation, Fla.