1st Time Home Buyer Loans Are Still Available

Interest rates are low but if you are a first-time buyer, is the situation is different? Do you have enough cash for a down payment — at least 3.5 percent for a Federal Housing Administration loan, as much as 20% for a conventional mortgage or FHA home loan. — plus closing costs?  Bad credit home loans are not as readily available in 2009, but FHA still offers new home financing to borrowers with poor fico scores if the applicants have significant compensating factors.  Is your job or career relatively stable?  “Now is a much better time for home financing than a year and a half ago,” said Chris Toadvine, a certified financial planner in Orlando and president of the Financial Planning Association of Central Florida. “I think home prices may fall a bit further, but if I were a buyer, I would not be trying to time a bottom.”

From a dollars-and-cents perspective, it’s certainly a buyer’s market. Asking prices for Orlando-area homes have not been so low at any time in the past four or five years, and the number of properties on the market is still at or near record levels.  “There’s a substantial amount of inventory still to be sold,” said Hank Fishkind, a private economist who analyzes the Florida and Central Florida real-estate markets for Attorney’s Title Insurance Fund and other industry groups and companies.

Foreclosures news continues to document the discounted homes for sale and these mortgage defaults will continue adding to the volume of homes for sale and keep downward pressure on prices throughout the year, Fishkind predicts, though he notes that the rate of increase in the number of foreclosures is now slowing.  The median sales price for existing homes in Central Florida has fallen about 30 percent in the past year, to well below $200,000. Prices are now back to levels last seen in the spring of 2004. New-home prices in the Orlando area have dropped about 20 percent from their 2006 peak, according to some industry surveys, to just more than $300,000, and are still heading down.

As a result, homes are much more affordable now than they were only a year ago. For example, a first-time homebuyer with the median household income of $34,947 in January 2008 had only 75 percent of the income needed to afford the median-priced existing home, which cost $188,275 at the time. But as of two months ago, a first-time buyer making the median of $35,334 had 96 percent of the income needed to afford that median-priced starter home, which by November cost $141,971.  Denise Kovach, a certified financial planner with Certified Financial Group Inc. in Altamonte Springs, said that, for first-time homebuyers who do not have to sell an existing house, this is a decent time to consider making a move. “As with the stock market, usually the best time to buy is when everyone is feeling most pessimistic,” she said.

Those first-time buyers can take advantage of a relatively new federal tax credit for primary residences purchased by July 1, 2009. The credit reduces your income tax dollar for dollar as much as $7,500, with the size of your credit depending on your home’s purchase price. It’s actually more like an interest-free loan from the government, because the IRS “recaptures” the credit during the next 15 years, or when the home is sold.  Read the original article>

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