First time home buyer? Now is the time to buy

First time home buyers have several reasons to take the plunge into home ownership these days.

Home prices have been declining for the past couple of years, some former housing bubble areas of the U.S. have seen drops 30 to 50 percent or even over 50 percent from the housing price peak. Florida, California, Arizona and Nevada have seen the worst declines. Based on income, home ownership is more affordable in some places than it ever was.

Another reason to buy a home these days is record low mortgage rates. Rates on 30-year fixed mortgages tied a record low this past week. Right now, you can get a 30-year fixed rate mortgage under five percent from most banks or lending institutions. Five-year adjustable rate mortgages (ARMs) can be found for under 4.5 percent. Though if you are planning to be in your home for a very long time we recommend a 30-year fixed rate mortgage, you might not be able to get mortgage rates this low ever again.

A third reason to buy a home is the 2009 stimulus package tax credit for first time home buyers. Qualifing buyers can recieve a tax credit equal to 10% of a home purchase up to $8,000 if they purchased a home between January 1, 2009 and December 1, 2009. A similar tax credit was passed last year but had to be paid back over 15 years, this one you don’t have to pay back. This credit starts to phase out if your AGI is over $75,000 for individuals and $150,000 for married couples.

There is also the FHA First Time Home Buyer Program which helps first time buyers who might not be ideal candidate for traditional mortgages. FHA program has the following benefits for first time home buyers.

• No minimum credit score – FHA does not have a minimum credit score requirement. The FHA underwriter will evaluate the entire credit profile to determine the borrower’s likelihood of repayment. Past credit issues may be overlooked if new credit has been re-established. Also, other compensating factors may apply.
• Bankruptcy okay – Chapter 7 bankruptcies are allowed if discharged over 2 years ago (or 1 year with extenuating circumstances). Chapter 13 bankruptcies are allowed with a minimum of 1 year of on time plan repayment and trustee approval.
• Less Money Needed - FHA loans allow the seller to pay up to 6% of the sales price toward the closing costs and only require a 3.5% down payment.
• Housing History– FHA does not require a rental or other housing history if it is not available.
• Non-occupying co-borrower allowed – FHA allows a non-occupying relative to co-sign the mortgage. The non-occupant’s income and assets can be used for qualification purposes. This is generally used for parents to help their children buy a home.
• Property types - 1-4 unit, condos, town homes, modular homes, and manufactured homes
• No cash reserves required – Unlike most conventional loans, FHA does not require you to have cash reserves on 1-2 unit properties. However, having reserves can help strengthen the overall credit profile.

Housing prices might still be declining but if you plan to stay in your home for a long time you’ll will come out a head in the long run. If you think about a home as a home and not as an investment you will have an easier time taking the plunge into home ownership. If you can afford your dream home now go for it.  Remember, you can’t really time a market bottom.