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May 11, 2016 07:00 ET

BMO Harris Home Buying Report: First-Time Buyers' Budgets Continue to Expand

- First-Time Budget for 2016 has risen to $246,378, an increase of 27.5 percent since 2014

- Expected down payment is 10 percent

- Majority of first-time buyers have made lifestyle cutbacks to save money

CHICAGO, ILLINOIS--(Marketwired - May 11, 2016) -

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First-time home buyers are setting aside an average budget of $246,378 - up from $193,197 in 2014 - according to the BMO Harris 2016 Home Buying Survey released today. This represents an increase of 27.5 percent in the past two years. Meanwhile, the average down payment percentage now stands at an average of 10 percent-down from 16.5 percent in 2014.

The report also found that first-time home buyers are:

  • More willing to make a budget that takes into account real estate fees, property taxes and home repairs (88 percent) - an increase from 75 percent in 2014
  • Making more cutbacks to their lifestyle to save for a home, with 71 percent willing to reduce spending
  • Aware that they can get conventional financing with as little as 3 percent down (53 percent)

In addition to the increased average budget from 2014, more than 80 percent of first-time buyers are confident they will have the money for their down payment when it is needed - a similar figure to other veteran buyers (88 percent).

"It's encouraging to see that first-time home buyers' budgets have increased and the intent to purchase has remained strong," said Kevin Christopher, Head of Mortgage Sales, BMO Harris Bank. "Purchasing a home for the first time entails many factors, such as understanding your budget and what options exist for first-time buyers. However, the desire to purchase a home and appropriately budget for it are the most important elements to start the journey."

The report also found that many buyers are starting to plan before searching for their first home. Even though very few first-time buyers are pre-approved for a mortgage (5 percent), more than 80 percent are planning to be preapproved before seriously shopping. In addition, 83 percent of respondents plan to 'stress test' their mortgage to be prepared for possible rises in interest rates in the future - an 11 percent increase over the past two years.

"Although the current housing market is constrained and causing an increase in home values, there are unique advantages for first-time home buyers who are willing to be flexible with their purchasing timeline," added Michael Gregory, Head of U.S. Economics, BMO Capital Markets. "Those who are willing to be flexible and work with owners who need a little longer to close for example, might be at an advantage over others who are less flexible. Although home values are heading modestly higher, affordability remains historically attractive, on average, across the country."

Tips and resources on the home buying process can be found on Your Financial Life at www.bmoharris.com/homehelp, along with:

- Applying for a mortgage? Here are 5 ways to prepare

- 8 home buying myths debunked

- Homebuyers: Here's your closing day checklist and budget

The survey results cited in the BMO Harris 2016 Home Buying Report, conducted by Pollara, are compiled from a random sample of 2,512 Americans 18 years of age and over between February 16th and 22nd, 2016. A probability sample of this size would yield results accurate to ± 2.0 percent, 19 times out of 20.

About BMO Harris Bank

BMO Harris Bank provides a broad range of personal banking products and solutions through more than 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. For more information about BMO Harris Bank, go to the company fact sheet. Banking products and services are subject to bank and credit approval. BMO Harris Bank N.A. Member FDIC. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with approximately 1,600 branches, and CDN $699 billion in assets (as of January 31, 2016).

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