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Programs can Help First-Time Home Buyers with Purchases

Programs can Help First-Time Home Buyers with Purchases

3/2/2007

Low mortgage rates aid clients of lower, moderate incomes

Despite the recent slowdown in the Valley’s housing market, prices haven’t dipped enough to make it easier for first-time home buyers to find houses they can afford.

But low mortgage rates and programs to aid fledgling buyers are helping some.

The current market is a great one for first-time and low- to moderate-income home buyers, said Teri Whiting, a loan officer with Bank of America in Chandler.

“If people have fairly decent credit and stable employment, they should be able to get into a home,” she said.

One of the biggest programs to help first-time buyers is from the Federal Housing Administration. FHA loans have been around for a while. They are backed by the government so lenders are more willing to take a potential bigger risk funding a loan to a first-time home buyer.

FHA loans do not require a credit score, said Patrick Ritchie, a loan officer with Advisors Mortgage in Tempe and author of The Credit Road Map.

“They’re (the FHA) more concerned about have you paid your bills on time for the past 12 months and not having any open collections,” he said.

Ritchie said the current cap on an FHA loan in Maricopa County is $263,150. It varies by market because home prices vary by city. The median price of an existing house in the Valley is $260,000.

Young veterans should consider looking into Veteran Administration loans that can also be a safer and easier way to get a mortgage.

First-time buyers eager to get into a home of their own shouldn’t try to buy more than they can afford.

Ritchie advises them to carefully calculate the difference between the rent they are currently paying and their potential mortgage payments.

“Nobody should ever get into a mortgage that’s going to be painful each month,” he said.

Many mortgage people are advising first-timers to take advantage of fixed-rates since they are almost as low as adjustable rate mortgages now.

For the week that ended March 1, the interest rate on a 30-year mortgage was 6.18 percent, compared with rates ranging from 5.93 percent for a five-year adjustable mortgage.

Some homeowners, who went for adjustable rate mortgages during the past few years so they could afford metropolitan Phoenix’s higher home prices, are feeling the squeeze now and may be in danger of losing their homes.

“I see the refis coming from the adjustable rate mortgages that are going to take a significant jump, and (from) the people who have tapped into their equity and want to combine their first and second into one mortgage,” Whiting said.

Rising foreclosures and delinquency rates have some lenders pulling back from doing more risky loans, which often go to first-time home buyers or buyers with less solid credit.

At least 14 subprime nationwide lenders have gone out of business since January 2006, with most of that occurring toward the end of last year, Ritchie said.

David van den Berg, The Arizona Republic, March 2, 2007

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