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Is 2012 the year for first time buyers?

26 June 2012 21 Comments

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.

Credit

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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.

Savings

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.

Market Conditions

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.

Help

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.

21 Comments »

  • Accountant Salary said:

    If you don't have a home to sell, an excellent time to buy is when the economy is bad, since houses are cheaper and interest rates are low. The bad news is that lending companies and banks are much stricter with their loans now than they used to be.

  • Abbott Clarke said:

    Here in the UK the feeling is that it is definitely a good time to buy for those looking to get onto the ladder for the first time. However in the grand scheme of things the amount that house prices rose between 1990-2008 means that proportionally many are priced out compared to previous generations, and we are seeing many staying living with mum and dad til their late 20's

  • Dave said:

    I would start with a smaller property and proceed to get another property if the economy starts to get bad bad near 2015. just gotten an overseas property at 250k. Saving the rest of my money for the opportunity in 2015. 🙂

  • alisdiar said:

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  • bird feeders said:

    I agree, this is generally what I'm finding mentioned in most articles and videos I come across

  • Rizwan said:

    I thinks buying home is a very good investment because if you want earn money then you should to do it.

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    Although currently not a good time to buy a house on credit, but it should be done because the house is a basic need of every person. Therefore, the government should be able to set interest rates low for this.

  • molac said:

    It depends on their first launching. If the duration has been some years ago, I think it don't make sense.
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    I think to buy a property is a sufficient need of thought. In my opinion, this is a pretty important thing to do because it involves the future. Therefore, the cost of preparation and proper site selection is very important.

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  • Jim said:

    Now is an excellent time for firsttime buyers to get into the market. Interest rates on home loans are at 3.50 percent when was the last time that happened 1938.

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  • 5LINX said:

    Unha vez que vostede sabe exactamente canto das transaccións comerciais necesarios para cubrir todos os gastos, automaticamente tamén sabe transaccións comerciais exactamente cantos necesarios para sobrevivir. Este é o custo que vai gastar para abrir a porta a cada día.
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    Gaining loyal buyers is not an easy thing to do. We as the seller should firstly be able to buy the loyalty of the customers.
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  • glock magazines said:

    Voel egter nie dat jy moet 'n begroting vir bemarking van miljarde dollars eerste en dan die resultate te bereik. Daar is duisende van klein besighede wat adverteer intelligent met 'n minimale koste.
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  • Rizwan Ahmad said:

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