Buy A Home Without A 20% Downpayment
The housing market is quietly building momentum, buoyed by mid-range home values and a growing group of buyers. If your plans for 2012 call for buying a home, the sooner you act, the better "deal" you may get.
First-Time Home Buyers Drive The Market
Each month, the National Association of REALTORS® releases its Existing Home Sales report. The Existing Home Sales report includes a tally of Total Units Sold during the month prior; and Home Supply, the number of months it would take to sell the nation's housing stock given today's sales pace.
These figures are known as "headline data"; the easy-to-understand data nuggets on which the media reports to the public.
The Existing Home Sales report goes deeper than just headline data, though. It includes all sorts of statistics that can help the astute home buyer better understand what's really happening in housing.
One such statistic is the real estate trade group's breakdown of Home Sales By Buyer Type.
In November, the Existing Home Sales report shows, 35 of every 100 buyers were First-Time Buyers, an increase from October and part of a longer-term, pro-housing trend.
One year ago, First-Time Home Buyers were just 32 of every 100 buyers.
First-Time Home Buyer Financing Spurs Housing
In November, home sales were dominated by homes sold for $250,000 or less.
This price point is the domain of the majority of first-time home buyers, with the notable exception of such "high-cost" cities such as Washington, D.C.; San Jose, California; and even Chicago because many of its city condos sell at price points north of $250,000.
For every one else, the combination of relatively low home prices, historically low mortgage rates, plus access to low downpayment mortgages made home ownership possible.
As one example, the FHA 30-year fixed rate mortgage allows for a 3.5% downpayment on a purchase, and seller-paid closing costs. The program is also liberal on mortgage qualifiers including credit scores and income history, making the FHA mortgage an ideal choice for first-time buyers.
Ultra-low mortgage rates help, too.
While conventional mortgage rates have dropped to 4% and lower, so have FHA mortgage rates. Today, you can buy and finance a home with an FHA mortgage cheaper than at any time in history. It's no wonder that 3 times as many mortgages are financed via the FHA versus just 5 years ago.
First-Time Home Buyers have other low downpayment programs available to them, too, including the 100% USDA mortgage and the 100% VA mortgage for veterans of the U.S. military.
You don't need a 20% downpayment to purchase a home.
Home Prices Rising For First-Time Buyers
When 2011 ended, home sales were rising and home supplies were falling. This combination leads to higher home prices -- it's basic economics. And now, with the jobs market showing signs of a thaw, demand for homes should rise again this year.
When it does, first-time home buyers may find themselves priced out of a purchase, save for falling mortgage rates and access to low downpayment mortgages.
If you're planning to buy your first home in 2012, therefore, consider buying sooner rather than later. You may find your best deals of the year are the ones you grab early.