New Rules for First-Time Home Buyers

Picture1If you have been following me for a while, I have been talking about big changes coming down for first time buyers.  Here is a great article that summarizes what I have been preaching:

Without a house to sell , first-time home buyers have had a field day in the depressed housing market. Until recently, anyway. A series of new rules, regulations and policies have changed the landscape, making buying that new home harder and more expensive.

Not long ago, first-time buyers accounted for 40% of home sales. Now they’re down to 29% and falling, experts say, as first-time buyers confront a steady accumulation of rising fees, costs, and rates. This month, fees on most new mortgages will rise by up to 0.50%. In April, fees on small-down-payment mortgages, a first-time buyer favorite, will spike. Meanwhile, more lenders are requiring larger down payments, and new proposals from the Obama administration call for mortgages to become more expensive and limited in size.

The new fees and higher barriers to entry are all a response to the sweeping mortgage losses of the last several years. Banks and other lenders lost billions of dollars on subprime and other risky mortgages, and some must now buy back bad loans they sold to Fannie Mae and Freddie Mac. To cover those losses, banks and the agencies are raising fees on new mortgages, says Keith Gumbinger, a vice president at HSH Associates, which tracks the mortgage market. Also, from the perspective of lenders and the government, making it harder and more expensive to get a mortgage will deter or cull the riskiest borrowers and minimize defaults.

But taken in total, all this reform means the window of opportunity for first-time buyers may be closing…

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