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Determining Affordability for First-time Buyers

housesWhat is the difference between first-time buyers who bought a home and those who didn't? According to an analysis by RealEstate.com, it could well be $30,000—the median income difference between those first-time buyers who could afford a home and those who couldn't.

The analysis said that the typical first-time buyer earned more than the median household income that helped them towards affording a home.

The analysis revealed that the median income for a first-time buyer is $72,500, compared with the national median household income of $60,700. The difference in income for first-time buyers is more pronounced when compared with their peers who didn't buy, who have a median income of $42,500.

The analysis found that while most buyers relied on savings as well as proceeds from the sale of a home to finance the down payment on a new property, first-time buyers didn't have the same resources. This is where a higher income came into play to help them save for a down payment.

"Buying a home, especially for the first time, is a major step in a lot of people's lives," said Justin LaJoie, General Manager at RealEstate.com. "But with home prices climbing ever higher, and inventory yet to see sustained increases, getting a foot in the door is incredibly difficult for new buyers who can't rely on selling another home to come up with a down payment."

Looking at the down payment that first-time buyers could afford, the analysis revealed that this group of homebuyers usually put down slightly smaller down payments. The median down payment for first-time buyers according to Zillow was 14.5 percent of a home price compared to the traditional 20 percent down. Fifty-eight percent of repeat buyers, on the other hand, put down at least 20 percent down payment.

With this smaller down payment, the analysis indicated, first-time buyers, earning a median income could afford to buy a $338,000 home, meaning they could buy about 68 percent of available homes.

About Author: Radhika Ojha

Radhika Ojha is an independent writer and editor. A former Online Editor and currently a reporter for MReport, she is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.
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