Posted by: Larry Stevens | January 3, 2013

2013 Is Your Year to Become a First Time Home Buyer Posted by Dan Moyle on Wed, Jan 02, 2013

If you’ve been planning to make a move to buy your first home but have been waiting  to see how the US market plays out,  don’t wait any longer. 2013 is the year to take the leap. The market has been showing steady signs of recovery over the last months. However, interest interests are still low and home prices are still low enough for you to snag a good deal. Let’s take a look at why it’s your time to become a first time home buyer in 2013.

Jump in
A window of opportunity remains open but it will start to close and become harder to get through after the festive season. Those who were keen to sell will return to it and you can be sure that their prices will go up as the market continues to recover.

As at October 2012, the median price of  a ready  single family home was $178, 700. According to statistics from the National Association of Realtors, this represents a rise of 11 percent from the same time the following year.  It was also a dip from of 13 percent from the $204,800 tag of October, 2007.

One place that the window of buying opportunity is still open wide is in Phoenix. Home prices are inching up but they remain at 40 percent below the the peak. Other areas where it is a buyers market, as least for now, are the metropolitan areas of Denver, Dallas and Miami.  These areas are still currently below their peak – prime markets for the 2013 first time home buyer.

Historically low interest rates
As prices inch upwards, mortgage rates remain very low.  The average interest rate for conventional 15 and 30 year mortgages slumped to record lows when the housing market crashed and they still remain low.

A good time for first home buyers 
Most 2013 first time home buyers will have an easy time buying. Many are going for Federal Housing Administration (FHA) loans to take advantage of their criteria for credit and down payment which is much friendlier and flexible than that of standard loans.

FHA woes and new rules 
At the moment though, FHA is facing difficulties in form of losses amounting to billions of dollars on loans that were given out between  2007 and 2009. In an attempt to stabilize, the agency is set take measures including increasing  yearly insurance premiums as well as changing the rules that made allowances for lapsed insurance.

Typical borrowers will have to pay an up-front premium of 1.75 percent of the amount they wish to borrow. Also from the beginning of 2013, they will have to pay a higher annual premium of 1.35 percent which is a 0.1 percent increase from the previous rate of 1.25 percent.

Time to spend speculating
If you have been waiting to see how things will go and perhaps waiting for prices to fall further or have remained a renter because you didn’t qualify for a mortgage, it is time to get off the fence.  With the housing market as it is at present, it is cheaper to rent than to buy. And with all the first time buyer schemes and incentives that significantly reduce or eliminate deposits and are much more flexible on credit scores and other criteria, most first time buyers can find a scheme that they can fit into.

More stringent lenders
Moving forward, you can expect that lenders will be much more vigilant.  As home prices slowly but steadily recover to the levels they were at before the crash, lenders will not be as flexible as they were when the market was booming.

Lenders can be a bit like mad scientists, going over loan applications with magnifying glasses to avoid the crashing losses of the period before.  Some borrowers will now need a FICO score that is not below 740 and they will need to have the funds to put down a 20 percent down payment of a house in order to qualify for a standard loan.  As a first time buyer, you can take advantage of loans backed by FHA for which the down payment required is 3.5 percent and lenders will usually want to see a FICO score of around 640.

Tax returns
As first time home buyer in 2013, you also need to be ready to read and sign a lot of paperwork.  Some of it will be tax returns that goes back to the last year and pay stubs over the last six months which have to be submitted by employers. This was not previously the case.  Statements from your bank as well as your brokerage firm will also be required.

Another change is that mortgage pre-approvals are expiring faster. Whereas they used to be valid for 60 to 90 days before, now they are only valid for 30 days after which lenders will want to new updated information.

Do it now
If you make and keep one resolution for the coming year, it should be too make 2013 the year you own your first home.

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