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Aug
02

Motivating First Time Homebuyers Beyond Low Mortgage Rates

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First time homebuyers have not been rushing to become homeowners as they have years ago when home mortgage rates had dropped into the 4% range.  The lack of home purchase loan activity has stumped many economists.  Many mortgage insiders are astounded that 4% fixed rates are not enough of a motivation for first time home buyers.  First time home buyer loan activity will rise when consumer confidence rises.

There are several factors that contribute to lack luster home loan activity in the summer of 2010.  Yes the tax credit for first time homebuyers expired on April 30th.  Sure that was a good incentive to drive first time homebuyers, but this is not the primary reason that home loan application volumes have been faltering the last few months.  If Forrest Gump was hear, he might say, “It’ the loan guidelines stupid.”  According to Ronnie Sullivan at the Mortgage Depot, “Mortgage lenders have tightened loan guidelines to the point where not that many consumers qualify anymore.”  Sullivan continued, “borrowers need to be able to document their income and demonstrate that they have the ability to re-pay the mortgage loan.” 

Notable Instances of Mortgage Lenders Tightening Guidelines

1. FHA increased down-payment requirements from 3% to 3.5%

2. FHA reduced the maximum loan-to-value on cash out refinancing from 95% to 85%

3. Most Mortgage Lenders Eliminated Stated Income Home Loans

4. Most Home Loan Lenders Eliminated Down-Payment Assistance Home Loans

5. Conventional Lenders No longer allow a 10 or 20% second mortgage to replace a down-payment & the need for mortgage insurance

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