First Time Home Buyer

Many potential first time home buyers are wondering what to expect when they approach a lender given the latest developments in the whole mortgage mess we are in.  Will the required down payment be more than 5 – 10%?  Are there any 0% down payment programs out there for first time homebuyers anymore?  How does the first time homebuyer sort through all the changes that are taking place anyway?

Many first time home buyers have these questions as well as other pertinent questions on their minds.  This is in part because of the current credit crunch that the United States is experiencing.  The answers?  Yes, there are 0% down payment programs available for the first time homebuyer still; however, many have stricter qualifying regulations.  Being aware of the changes in the rules can help avoid stress and confusion during the buying process. 

One of the first and most important things to consider is that credit scores are more important today then they ever have been.  Chances are if you have any blemishes on your credit score at all a lender will not want to extend a 0% down payment loan to you.  Therefore, before even beginning the process of pre-approval or shopping for homes and or lenders you will want to pull your own credit report.  You can actually do this once a year for free from each of the three main credit agencies.  Look at the report to see if there are any items listed that need your attention.  Dispute anything that is not correct, if something has been paid in full but is not reported as such you can have that changed before a lender looks at the report.

You are likely to find that lenders are getting rather restrictive on a whole and particularly with the ratios that they use when qualifying for a loan.  For instance, if you need private mortgage insurance, which is generally required for people who put less than 20% down, then the private mortgage insurance company might require a larger down payment.  They may simply allow a smaller ratio as well; this will end up lowering the total amount that you are able to borrow.  It is competitive today and despite the fact that people want and need to move the huge number of available homes off the market lenders want to make sure they will not be foreclosing on a home because of defaulted loans too.  Fully understanding all the rules and doing the foot work first is very important in this tougher mortgage environment; however, doing so will put you ahead of the game and help to secure your mortgage and your first home.

The recently launched web site, www.federalhousingtaxcredit.com, that was developed for the newly signed tax credit law has brought over 100,000 visitors.  This shows that there is a rather strong interest of first time home buyers wanting to take advantage of the temporary incentive.  The $7,500 tax credit is available for all first time homebuyers who buy a home from April 2008 to July 2009.  The tax credit was signed in hopes of encouraging potential first time homebuyers to take advantage of the surplus of available homes and buy now.  Many potential first time homebuyers have hesitated as the economy continues to dip; however, now is a buyer’s market and a great time to take advantage of the falling home prices.

According to the National Association of Home Builder’s President Sandy Dunn, in response to the number of hits on the website, “The initial response is encouraging”.  She goes on to say, “This could be the trigger that helps move prospective first time buyers off the fence and back into the market.  But it won’t last forever.”  The tax credit that is drawing so much attention is a part of several provisions that have been enacted into law recently that was meant to get the housing market and the economy back on their feet, so to speak.  The attention and number of hits is encouraging but time will tell.

The popular web site offers useful information regarding how the tax credit will work and includes the requirements for eligibility.  So far the site has attracted nearly 120,000 hits which work out to nearly 10,000 per day.  Details, questions and answers regarding how first time homebuyers can take advantage of the credit is divided into four user friendly sections:

• Tax Credit at a Glance:  Providing an overview of just how the credit works this section is valuable to the visitors who are just hearing about the tax credit incentive.
• Frequently Asked Questions:  This section offers an easy to understand common questions and answer format and contains basic information regarding the tax credit.  This includes the definition of a first time homebuyer, the homes that qualify for the credit, the income limits that will qualify as well as the payback provision and other common questions and concerns. 
• The Law’s Other Provisions:  This section offers a summary of a number of provisions from the Housing and Economic Recovery Act of 2008 in addition to the tax credit.  This section will offer information on how to prevent foreclosures, revive the housing market and how to make the nation’s economy stronger.
• Home Buyer Resources:  This section offers links and resources that will make the buying process simpler and smoother for the first time homebuyer.

The efforts of the website and the Act come at a time when the housing market is in crisis and the number of foreclosures is increasing steadily.  The crisis casts a shadow of gloom over the economy on the whole and by stimulating the housing industry with relief and incentives there is a hope that will move that shadow away and offer a ray of hope and sunshine.

The state of Vermont, particularly the area of Chicopee Falls are finding hope as the Chicopee Neighborhood Development Corporation closes on properties in the city resulting in new homes for low to moderate income families. In an effort to provide housing and revive the area programs are setting out to assist families that are struggling to become first time home owners in today’s economy. This is the first housing projects the CNDC, a nonprofit corporation, has undertaken after its reactivation in the fall of 2007. The houses bought by the nonprofit company will be sold to first time homebuyers. This is causing a lot of excitement in the community as there seems to be a need and a desire to bring residents to Chicopee.

The properties that were recently bought by the CNDC are in the Chicopee Falls area of city and will have single family homes built on them. They are hoping to be able to break ground on the properties in October. Once built, the homes will then be sold at below market prices that are in the $140,000 to $160,000 price range which is considered affordable for the average family of four in this area.

The company will begin marketing the homes to first time home buyers as soon as they break ground. First time homebuyers will have guidance and assistance from the CNDC including assistance in securing a first time home buyers loan to the home inspection process and the additional rigors of the first time home buyer.

To qualify, potential buyers must first take a first time homebuyer course from a certified First Time Homebuyer Counseling Agency; fortunately the corporation is such an agency. The corporation will also offer financial assistance to qualified first time homebuyers as well. The CNDC has recently launched a Web site to make their services more accessible to people; the site is http://www.chicopeedevelopment.org/.

The city’s housing director said that it is not surprising that the programs have been so well received. Letting people know there are resources available to people to help them help themselves is a great thing.
The homes are able to be sold at below market prices because of federal funds used by the city for construction loans and developmental subsidies. This year the city has used $300,000 in federal housing funds to help finance the construction of two other single family homes in the area and both are now owned by families.

Mayor Michael D Bissonnette initiated the revival of the Chicopee Neighborhood Development Corporation last year in an effort to help people become home owners and give new life to oppressed neighborhoods. Targeted areas for this include the Chicopee Center, Willimansett and Chicopee Falls. This revitalization and program is met with great hope and great excitement from the city as well as those finding help and relief.