First Time Home Buyer

It is the opinion of many people that the government, despite what the President may say, will in fact bail out mortgage high players Fannie Mae and Freddie Mac. For these companies to fold would be detrimental to the economy. But what exactly are Fannie Mae and Freddie Mac and what do they do? Simply put, a home buyer achieves a mortgage from a lending institute and Fannie Mae or Freddie Mac purchase the mortgage to then resell it again to investors. They receive money from the sale to the first lender to continue lending. In the last decade Freddie Mac handled nearly $164 billion in New York mortgages alone; serving over 1,325,000 families. If Freddie Mac and Fannie Mae have serious financial problems then credit will tighten and it will become increasingly difficult for any consumer to get a mortgage; but particularly for the first time home buyer. At this point it is unknown how much money these companies will need to borrow from the Federal Reserve, the government or the public treasury; however, the government has stated that if they do need it they can come for it. With the potential for government bailouts confidence is building.

When push comes to shove, impact from national news or news on a local level does not change the rules in applying for a first mortgage; make sure you have your finances in order before shopping for a home, make sure your credit is in line and be aware of your credit score. The first time home buyer needs to educate themselves more than ever as lenders begin to tighten their belts. Knowing what your credit score is, how to increase that score and look favorable to the lenders will increase your chances of obtaining a mortgage regardless of what is happening in the financial world; these are basic rules.

Before a lender will grant a loan for a home he will first run a credit report on the buyer to help them get a picture of the buyer’s ability to pay the loan. The last thing a lending institute wants is for a buyer to get in over their head and default on their mortgage. It is therefore recommended that before shopping for a home or showing up at the lending institute to apply for a first mortgage you run a credit report of your own. You can do this for free once per year by going to annualcreditreport.com. This will help you figure out any areas that need to be corrected and what areas could be improved. Once you are satisfied and your lender runs the report he will be able to help you understand what you can afford. If you have discovered your credit is in shambles or your credit score is low there are ways to bring up your credit score and you will have the time to do so.

Freddie Mac and Fannie Mae having financial problems is just the reflection of what is happening in the economy today; we are all feeling the pinch. This is a time, more than any to tighten our own belts, avoid using credit excessively and manage your credit well; doing these things will allow you to be among the few people that the lenders extend a first time home buyers loan to.

Talking to many people today they are looking forward to becoming a first time home owner and with the prices of homes sinking rapidly they think it is a great time to buy. Homes that would previously be far out of reach are now becoming more affordable, to the excitement of the potential first time home buyer. Unfortunately, according to several reports, mortgage insurers have been upping their standards in the United States. What this means for the first time home buyer is they have to be at the top of the bar that is raised to obtain the mortgage. Mortgage insures are defining an ever increasing number of markets as declining. In these areas that they list as declining they are requiring a higher down payment as well as higher premiums. This means that the homes that were thought to now be affordable are still out of reach for the first time home buyer. The buyer will have to have a substantial down payment and in the declining economy saving 5 to 15 thousand dollars for a down payment is out of the question.

The market that seems so appealing to the first time home buyer and others hoping to cash in on the floor dropping out of the housing market may not be as profitable as once thought. The national home price index fell about 16% from its peak in the second quarter of 2006 and in some markets houses are selling for 50% less than a year ago. They; however, are not being sold to many first time home buyers but instead to developers hoping to turn a profit.

Additionally there is a surplus of bank owned forecloses today making prices fall even farther. Between the foreclosures and other homes on the market there are plenty of affordable homes to choose from. If only the tightened mortgage standards would allow people, including the first time home buyer to clear out the inventory. There are ways of obtaining a substantial down payment and the first time home buyer with control of his credit score and shows reliability and responsibility will be able to cash in on the falling house prices and afford the unaffordable dream home. With private buyer assistance programs, gift money from family, savings over time and the sale of high dollar assets even the first time home buyer will be able to meet the heightened lending standards of the mortgage insurers.

Business is still business and companies are still in to turn a profit. Making sure you are at the top of the class will ensure you obtaining that mortgage and moving into the home you have dreamt of. Run your credit report, make sure it is in good shape, have a substantial down payment ready and start shopping for that dream home today.

Before first time home buyers can positively affect your credit score you must first be able to understand what the report it and how the score is appointed. A credit score is given to you based on your credit report obtained from one of the 3 major credit reporting agencies. Your credit score is intended to reveal the likelihood you will default on your loan or declare bankruptcy. To obtain the credit score, a borrower is compared to other consumers that are similar to them. A borrower who has two late payments over 30 days is scored against comparable delinquent-payers. The borrower is graded according to risk variables used by the scoring model and will is ranked within the group of comparable borrowers. Credit scores generally range from 300 to 850 with the average credit score in the United States being 698. FICO is the most widely used credit scoring model and basis its scores on 5 criteria:

• Payment History: 35%
• Amount Owed: 30%
• Credit History Length: 15%
• Amount of New Credit: 10%
• Mix of Credit: 10%

To maximize your positive credit on your credit report you will want to make sure you pay all of your bills on time every month. You will also want a healthy mix of credit such as a car loan, student loan and credit cards. Credit of just credit cards does no make a sound credit score. Pay down your bills so that you have 30% of the credit limit in use. A lender does not want to see your credit cards maxed out, nor do they want to see them never used.

Essentially after running your credit report you will want to look for items that are incorrect and dispute these immediately. If there are items on the report that have been paid off call the institute and inform them that they need to have the credit agency mark this as paid-in-full. Strive for a mix of credit and pay down your bills. If you have a lot of medical issues on your credit report make sure you are at least making regular payments will help the lender see you are responsible in paying your debts.

Allow at least 6 months to start seeing a difference in your credit score when you are working to positively affect it. Note that disputing an issue will immediately remove it and will have a good impact on your credit score quickly. Your credit report and work on your credit score should be your first step in any large purchase such as an auto loan or a mortgage. The last thing you want to do is find that perfect house, fall in love with it and find that your credit report has issues that need to be addressed first. Get your report; find out your score and work to improve it first. The better your credit score is the better loan and interest rate you will be able to get making your overall mortgage payments lower.