By: AnnaMaria Andriotis – SmartMoney.com
Without a house to sell , first-time home buyers have had a field day in the depressed housing market. Until recently, anyway. A series of new rules, regulations and policies have changed the landscape, making buying that new home harder and more expensive.
Not long ago, first-time buyers accounted 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. This month, fees on most new mortgages will rise by up to 0.50%. In April, fees on small-down-payment mortgages, a first-time buyer favorite, will spike. Meanwhile, more lenders are requiring larger down payments, and new proposals from the Obama administration call for mortgages to become more expensive and limited in size.
The new fees and higher barriers to entry are all a response to the sweeping 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. To cover those losses, banks and the agencies are raising fees on new mortgages, says Keith Gumbinger, a vice president at HSH Associates, which tracks the mortgage market. Also, from the perspective of lenders and the government, making it harder and more expensive to get a mortgage will deter or cull the riskiest borrowers and minimize defaults.
But taken in total, all this reform means 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, though they have increased over the past five months, interest rates are still low. Of course, there are still reasons to wait to buy: The changes to the mortgage market could depress home sales and prices further. But for those who don’t want to wait, here are the new rules for first-time home buyers.
New rule: Put more money down.
Not because you’ll have to — it’s still possible to make a down payment of less than 5% — but because you want to. Insurance fees on the government-insured mortgages that require just 3.5% down have doubled in seven months, to up to 1.15% (as of April). On a 30-year, $300,000 mortgage, a buyer would pay $30,000 more in fees than if he had signed up for the mortgage in September. Also, between new lender requirements and cash-flush buyers, down payments have been rising since the last half of 2010 and now average 34% of the purchase price, according to the latest data by mortgage-data firm CoreLogic.
It’s unlikely that a first-time home buyer can save so much money for a down payment, especially in high-priced markets like New York and San Francisco, says Cameron Findlay, chief economist at LendingTree.com, which tracks mortgage rates. Instead, first timers might need to consider alternative options to get cash , like grants offered by individual states. And most lenders still permit buyers to use cash gifts from family with a notarized letter from the donor stating that the money doesn’t need to be paid back, says Gumbinger. Or, a buyer who’s open to co-owning a home can sign up for a mortgage with a co-applicant who has extra cash to put down but wants a stake in the property.
By: Michelle Reese – East Valley Tribune
For seven years, Chandler resident Sharon Constant watched new home developments pop up, looking for a new place to live.
Constant spent 10 years working as a new home salesperson before the bubble burst. With that experience, she knew what she wanted – a new single-level home, with an additional bathroom and a view.
Last week, Constant plunged into the new housing market in the East Valley again, this time as a buyer.
She and her fiancée, Van Johnson, camped out to get their first-choice lot when Fulton Homes opened Monterey at Fulton Ranch. In just one month, 33 percent of the development’s 89 lots have been bought.
For Constant, “It was not only location, it was the lot and the plan.”
There appear to be positive signs in the new housing market in the East Valley. Builders are buying land or announcing developments. More people are trekking out to see builders’ models.
Stalled projects are on the upswing. At Gilbert’s Morrison Ranch, construction vehicles are moving again, with Blandford Homes and Richmond America entering the mix as other builders finish their phases.
By: Brandon Cleveland – New Home Sales Agent
Sitting here in my new home sales office day in and day out, I meet a lot of folks who are comparing new AND used homes for purchase…and while I understand the birds-eye appeal of all the ‘bargain’ used homes in this current market; I often wonder how much consideration is being given to life in a used home beyond the attractive price tag.
I know many homebuyers and industry professionals are already aware of the potential pitfalls associated with a ‘bargain’ used home purchase so I’m not going to talk about that in this post. Likewise I figure most folks, at some point, have heard of all the benefits of buying ‘new’ vs ‘used’…warranties, more choices, etc… so I don’t want to talk about that either.
But what about life after the home purchase? How many homebuyers really understand the substantial cost-of-ownership savings a New Home is capable of providing over the average used home on the market today?? Let’s consider the following side-by-side comparison of a New Home versus a “used” home:
THIS is the sort of comparison a typical homebuyer is making when they come through my doors. They want the NEW home of course…who wants something that is ‘used’ when they could have something that is brand new? They are just trying to wrap their head around the idea of spending an extra $170 per month when there is a less expensive option on the table.
But what about life after the home purchase? The fruit of a New Home is in the ongoing cost of ownership…things like maintenance & repair costs as well as monthly utility expenses. Most ‘experts’ say that typical maintenance/repair costs average out to anywhere from 2% – 4% of the purchase price annually. Whether or not a homeowner budgets & saves for those ongoing expenses, the cost is real and should be accounted for one way or another. The basic energy costs (lighting, heating, electrical, cooling) is another ongoing expense that isn’t going anywhere and absolutely needs to be taken into consideration. The local electric utility in this area has experienced a 5% average rate increase over the past 20 years . . . which means the longer a homeowner lives in a New Home, the more they will save.
A bargain-priced ‘used’ home may look like a good deal, but looks can be deceiving. Think about life after the home purchase… As illustrated above, a New Home can be less expensive to own thanks to the advanced energy-efficient features that are included!
…could a New Home really cost LESS than a ‘used’ home? Absolutely!
Brandon Cleveland is a new home sales agent for Meritage Homes in Phoenix, Arizona. You can read more from Brandon on his blog, “Going ‘Green’ In Gilbert“.
