First Time Home Buyer

Can the financial news get any more depressing? We are being reminded constantly by the media of who bad the economy is and you may be feeling that now would be a bad time to consider buying that first home. Gas prices are near record highs and inflation continues to increase faster than our incomes and the jobs are going by the wayside every day not to mention that real estate is being pounded by adjustable rate mortgages that are beginning to reset and result in higher payments and an increase in foreclosures. With all of these things is it really a good time to buy a house? The answer is absolutely!

It is true, many will tell you that the outlook to buy a new home is grim at best and reports say that existing home sales will decrease nearly 7% this year. Additionally new home sales are decreasing about 3 times that and it is getting so desperate that some developers are offering unique and extravagant deals on homes including two for one deals. Still, if you have available funds to secure the financing this is a great time to take advantage of all the incentives and buy that first home. The housing crisis is more of a problem for the individual who needs to sell an existing home before being able to buy a new home; for the first time home buyer they avoid that and can just buy.

No funds right this minute? That is probably OK because the housing problems is expected to continue for the next 2 - 3 years and therefore you have time to prepare. There is currently and is expected to continue to be a significantly higher number of available homes than qualifying buyers. This means that the first time home buyer who has good credit and a down payment can benefit with a large choice of homes that are selling for great prices; a market view that is called the buyers market.

Buyer’s Market

A large number of homes for sale, fewer people buying homes, home prices dropping continuously and interest rates not out of control yet; these are just a few incentives to buy now. Throw into the mix the deals and incentives the developers, builders and real estate agents are adding to the mix to try to move the homes and move new owners in and the tax credit from the government and how can you not buy now? Still not sure if you are ready? Ask yourself a few questions: Is your credit score in good shape or can you easily raise your score? Do you have assets that you can liquidate to get a down payment? Do you qualify for the incentives? If you answered yes to these questions you could be moving into your dream house this year. Additionally, with the buyer’s market you are almost guaranteed to be able to buy more house than in years past. So stop holding out…buy now!

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.

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.