How the Crunch on Credit is Bad for First Time Buyers
First time buyers who were getting their first mortgages were traditionally the golden goose for banks because once a bank had their business they usually had it for a long time and they made a lot of money off of them. However, first time buyers are now getting to be less and less important for banks because they are traditionally more risky than buyers who have established credit. So, how are first time buyers affected by the down turn in the economy?
It is complicated to answer this question. To answer it, you have to remember what first time buyers got when the economy was booming. In the past, first time buyers were able to get a mortgage without putting down a big down payment or they got a better interest rate than traditional mortgage shoppers. When they didn’t put down a large enough down payment, first time buyers found themselves in financial troubles when the economy changed for the worse. Because of the problems paying off these expensive houses often got put on the banks’ shoulders, these banks are now thinking differently about what to do with first time buyers.
You may want to know what is going to happen with your current first time buyer mortgage. You don’t have anything to lose sleep about if you already have your first time buyer mortgage with a good rate or other deal. It is only those who are currently looking for a mortgage that won’t get the same first time buyers deals that you did. First time buyers can expect to have to purchase special insurance to cover any low-down payment deals that they get, if they are able to get them. This insurance will add to the cost of the mortgage, and take away a lot of the benefits of being a first time buyer.
In the future, there probably won’t be as many first time buyer mortgage deals, because banks are not going to be able give away as many specials. In fact, mortgages are going to become more and more pricey and with the financial times changing, banks are going to be more cautious with lending out their money. Before, any Average Joe could get a mortgage, but in the future, you are going to have better credit and have a lot more security in order to get a mortgage. If you have good credit and are a good consumer this is going to be a benefit to you, because you are going to have to pay less for those who ruin it for you by purchasing a house way out of their budget. Every time someone defaults, you end up paying a little bit of their mortgage, so the less people that default the better it is for you. If you have bad credit, this might not be the best news for you.
First time buyers are going to be affected by a bad economy and problems with housing foreclosures. There is nothing that can be done now so consider yourself lucky if you already have your mortgage.
Tags: 1st time buyer, Finance, first time buyer
Posted in Finance
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