Is 2012 the year for first time buyers?
With the economic downturn still looming in the United States, it might seem as if 2012 is not a good year to be a first-time homebuyer. However, if you’re looking for your first home, this could be the right time to buy if your financial situation is solid.
Pay down credit cards faster by transferring balances from high interest cards to low or no interest cards. Check offers online, such as no fee balance transfer cards, so you can compare rates.
You must get your credit in good shape before applying for your first mortgage. With the economy struggling and the housing market crash, lenders have tightened their belts.
Even if you don’t have a lot of debt, you still need to make sure your credit rating is as high as possible. Pull your credit reports from the three major bureaus and check for mistakes. Mistakes on credit reports do happen and errors will harm your score.
A healthy savings account is a must for a first-time homebuyer. You’ll need a down payment of at least 20 percent of the home’s value for a traditional mortgage. Qualifying for a mortgage is more difficult now than it was a few years ago.
Lenders moved away from no and low down payment home loans after the real estate market crashed in the United States, causing a flood of foreclosures. If a buyer has more equity in their home at the start of the loan, they are less likely to default.
If you can’t come up with 20 percent, you may be able to get a lower down payment if you qualify for a mortgage backed by the Federal Housing Administration. The FHA has its own rules for some aspects of the loan application process, so you’ll need more documentation of your income and financial state to qualify.
Whether you qualify for a traditional loan or an FHA loan, you still need money to cover costs associated with a home purchase. A home inspection, for example, is usually paid for by the buyer and can cost hundreds of dollars.
As of 2012, the housing market is still unstable in the United States, with slowed growth. This “buyer’s market” is, for the most part, to your advantage.
A high foreclosure rate increases seller competition for buyers. In a flooded market, the buyer has the advantage under basic supply and demand principles.
If a street has 40 houses, for example and only one is for sale, the seller sets their price by local market values. But if that same street has 10 other foreclosed homes for sale by lenders, the competition creates lower prices. The private seller needs to weigh their price against the lenders’ prices so they can attract a buyer.
Buying a foreclosed property for a first home might be a good investment, but you must be careful. Foreclosed homes are usually sold ‘as is’, so the lender will not make any repairs before the sale.
If you’re considering a foreclosed home as your first home purchase, make sure you save enough money to cover unexpected problems. Discovering a problem after you move in is less disruptive if you have the funds to fix it.
If you’re struggling with financing for your first home purchase, consider asking family members and friends for help. Since lenders have tightened their mortgage eligibility criteria, you might find financing difficult even if you save and your credit is where it should be.
In the United States, more first time homebuyers have been turning to family and friends to cover gaps in financing. Most lenders will count funds from family members and friends as long as you have documentation that meets their requirements, such as a notarized statement.