While the economy may be suffering in some areas, it is a buyer’s market when it comes to real estate. Property values are fair and it is the perfect time for consumers to purchase their dream home at a comparatively affordable price. Mortgage rates continue to be at an all time low, giving the consumers another easier entry barrier for home ownership.
Additionally, first time buyer mortgages are yielding low interest rates due to finance companies’ efforts to attract more customers.
Low Mortgage Interest Rates Are Here
According to the recent 2012 Freddie Mac Primary Mortgage Market Survey, 30-year fixed mortgage rates are averaging below four percent, which is a 40-year low. A year ago, rates were over five percent. For 15-year mortgages, the rates are just over three percent. This is not only good news for new home buyers, but also those who want to refinance their current home loans.
This is the time for want-to-be homeowners who were fortunate enough to survive the troubled economy to look at taking out their first mortgage. With a large down payment and a good credit score, those consumers can find rates as low as 2.24 percent. For a smaller down payment of 10 percent, those consumers can still get low interest rates that range from 3.79 to 4.89 percent.
Getting More House Than You Pay For
Some homeowners who need to get out of their mortgages are taking big losses on their homes. Studies show that losses of 40 percent or more of the original value are common. In a situation like that, a young couple who is looking for their first home loan may be able to buy a house that would be worth 300,000 dollars for only 180,000. Some buyers are reporting even deeper discounts in some areas.
Preparing for Your First Mortgage
Lenders used to require at least a 20 percent down payment for first time buyers. Mortgage companies are more lenient now because they desperately need new customers. Many companies are offering loans for only 10 percent down and some are offering them for as low as four to five percent down.
To get ready for your first purchase:
- Make sure you have clean credit. Pay all debts on time and try to reduce the total amount you owe.
- If you have no credit, start building it with small loans or credit cards. If you have to get a secured loan, do so, but pay it on time.
- Start saving your down payment. Save as much as you can, but try to put down as little as you can. Many experts agree that it’s not a good idea to put a large down payment on a house, so shop around and learn the minimum you will need. Remember, you will probably have closing fees too.
- Do some math to learn what you can afford. Financial experts typically recommend budgeting more than 28 percent of your income for housing. After you know that number, you will know how much house you can afford.
Take the Plunge As Soon As You Can
Economic downturns have always reversed. Financial experts expect that to happen again. If you are planning to buy a home in the future, make it as soon as possible. The day will surely come when property values will increase again and first time buyer mortgages will have higher interest rates. If you can comfortably make your purchase now, your home will gain equity fast as the economy recovers.