Will People of Average Means Get Another Chance to Climb the Property Ladder?

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Forget buyers beware. It's time for first-time homebuyers of modest means to get in gear. Housing prices are falling, rents are rising and lenders are growing weary. As a result, people of modest means could be left dreaming of homeownership if they can't scratch up the money to buy while prices are down.

Forget buyers beware. It's time for first-time homebuyers of modest means to get in gear. Last year ended with a sharp decline in first-time homebuyers. According to the National Association of Realtors, there was a 40% drop in first-time homeownership in 2006 and the decline was partially attributed to increased housing prices in the wake of the housing boom.

"Now we're seeing changes in the housing market which have investors going wild and hopefully first-time homebuyers will catch on," says Robert L. Moffa, a sales manager for First Atlantic Mortgage Services.

The changes? Housing prices are falling, rents are rising and lenders are growing weary.

Long before the housing boom, mortgage lenders used a 36% debt ratio as a guideline for approving loans. However that debt ratio is up to 50 or 60% right now, making it much easier for consumers of modest means to purchase a home.

"During the course of this year I think debt ratio requirements will drop back down around 36%," says Moffa about the rise and fall of the lending rate. "Meaning investors will still be able to buy, but people of modest means will miss out on the lower housing prices."

The outlook isn't pretty for loan requirements. Personal debt is at an all time high and the number of people purchasing homes without a down payment is also at a record level.

"The floodgates are opening on thousands of foreclosures and sub-prime lenders are going under," says Moffa who helps secure between 3 and 4 million in loans each month. "This means lenders have no choice but to tighten up."

Currently, people with pre-approved loans have bargaining power in this buyer's market. In some cases developers are hungry for cash and are willing to liquidate new construction at little more then cost to pre-approved buyers. In addition, many homes are hitting the auction block with no minimum bid due to the failure of subprime lenders.

"It's unfortunate but those of modest means could be left dreaming of homeownership if they can't scratch up the money to buy while prices are down," says Moffa about projections from the National Association of Realtors that the median existing-home price is expected to rise 1.2% to $224,500 this year.

To contact Robert Moffa at First Atlantic Mortgage for more information on funding for first-time homebuyers, call him at 973-467-0022 or email him via the website http://www.famtgs.com.

Q: Can first-time homebuyers purchase a foreclosure at auction?
A: Yes, but a pre-approved loan is an absolute necessity. Remember that at an auction you usually need up to put 10% down immediately with final payments made within a number of days.

Q: Can first-time homebuyers purchase a foreclosure?
A: Yes. The good news is that the price is usually lower, the seller is motivated, and the home is empty and ready for immediate occupancy. Disadvantages are that you may owe back taxes. Also the homes are are sold 'as is' and there may be maintenance issues if the previous owner didn't have funding for repairs.

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CASSIE BOULDIN
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