22 Mar A New Playing Field for First-Time Homebuyers

A series of new rules, regulations and policies have changed the landscape of first-time homebuyers, resulting in the buying experience being harder and more expensive.

First-time buyers used to account for 40% of home sales. Now they’re down to 29% and falling, experts say, as first-time buyers confront a steady accumulation of rising fees, costs, and rates. Lenders are requiring larger down payments, and new proposals call for mortgages to become more expensive and limited in size.

This, of course, is in response to the devastating mortgage losses of the last several years. Banks and other lenders lost billions of dollars on subprime and other risky mortgages, and some must now buy back bad loans they sold to Fannie Mae and Freddie Mac.

The window of opportunity for first-time buyers may be closing. Home prices still seem to be near the bottom, mortgages are still cheap and interest rates are still low, but for those who don’t want to wait, here are some new rules for first-time home buyers.

More money down
As housing prices drop, mortgage lenders are requiring larger downpayments on homes.

It’s unlikely that a first-time home buyer can save so much money for a down payment, especially in high-priced markets and might need to consider alternative options to get cash. Buyers may have to be open to co-owning a home: signing up for a mortgage with a co-applicant who has extra cash to put down but wants a stake in the property.

Stay longer
Not only are the days of flip-and-move long gone, but buying a house has become truly a long-term investment. Experts predict very slow growth in home prices over the next 10 years, which means it will take a long time before sellers can make a profit.

For first-time buyers, this means sticking to a home that requires few major projects, which builds equity with the passing of time.

More competition
Over the past few months, investors, international buyers, and downsizing retirees have made a noticeable impact on the market, because they’re paying with cash.
To stand out, first-time buyers may have to present an offer with few contingencies; there’s little reason for a seller to work with someone who requests repairs or asks them to cover the closing costs.

How do you see these changes affecting the first-time homebuyer market?