Maybe you have seen that young couple pulling up in the driveway with a moving van after having purchased the house that has been for sale next door. It may be the couple that has finally decided to stop renting and take a chance at owning a home for their growing family. Whatever the life situation, more first time homebuyers have begun to take that leap into homeownership.
After all of the foreclosure scares, many potential homeowners were left feeling doubtful about their chance at successful homeownership. However, recent reports showed that the number of first time homebuyers has continued to increase for the tenth straight month. June reported an increase of nearly 24 percent, the highest since August of last year.
The reason? Many lenders are beginning to loosen up their lending qualifications.
Where Do I Sign?
In the past, minimum down payment requirements excluded many, otherwise qualified, buyers from obtaining a loan. The majority of first time homebuyers struggle to come up with the down payment and closing costs needed for a home purchase. Now that there is more flexibility in lending, these buyers are finding it easier to get the chance of a lifetime. With interest rates continuing to hover near their lowest in over 50 years, the first time homeowners have been afforded the opportunity to lock in these historically low rates.
Another reason for the recent loosening of lender purse strings comes from a new type of mortgage deal. Mortgage companies are offering higher loan-to-value mortgages, which protects the lender in the event of default, but doesn’t necessarily exclude buyers that can’t afford a large down payment. Since the mortgage company will be absorbing the risk involved in a lower down payment loan, the higher loan-to-value mortgage puts small measures in place to ease the burden on the lender. Typically, the buyer will be required to purchase mortgage insurance to protect against mortgage default, but only adds a small amount to the overall monthly payment the buyer makes each month. It is designed to allow more flexibility in lending without forcing the lender to take on all of the risk.