Great Time for First-Time Homebuyers

A few years ago, information inundated potential first-timers about how to take the leap via first-time homebuyer programs and other avenues that would make down payments affordable and escalating home prices feasible.

In today's turbulent real-estate environment, renters might think the days of first-time home-buying assistance are over. But that couldn't be further from the truth, experts say.

"The programs for first-time homebuyers that were always tried and true are still there," says Robert Baker, education manager for Housing and Credit Counseling Inc. in Topeka, Kan. Combine that availability with low interest rates and low home prices, and you have one of the best times in recent history for first-time buyers to take advantage of these programs.

"I've been in this business for 28 years and I've seen situations where the interest rates were high and the price of housing was low, and I've seen it in reverse," says Marc Savitt, president of the National Association of Mortgage Brokers. "But this is the first time I can remember both the price of housing and the interest rates extremely low and extremely affordable. This is the best time I have seen in my entire career for someone to buy a home."

Federal aid
Not only are market conditions favorable, the government is adding incentives to attract first-time homebuyers. As part of the economic stimulus package, a tax credit worth 10 percent of the purchase price up to $8,000 is available to first-time homebuyers as long as they sign on the dotted line this year. Unlike previous tax credits for first-time buyers, this one does not require repayment.

Homebuyers must meet income requirements to be eligible for the entire credit. If you're single, you must earn $75,000 or less. Married couples must earn less than $150,000, though those who earn more can qualify for reduced credits.

In addition to the one-time credit, first-time homebuyers can take advantage of special programs through the Federal Housing Administration, or FHA. The FHA doesn't make mortgage loans directly, but it insures loans made by private lenders, protecting those lenders from losses.

FHA-backed loans tend to have less stringent credit requirements, and they let homebuyers use financial gifts from family members, nonprofit organizations and employers to pay the entire down payment. However, the onset of the economic downturn has brought a change in these programs.

"We've raised our required down payment from 3 percent to 3.5 percent," says Lemar C. Wooley, a spokesman for the U.S. Department of Housing and Urban Development. "But that is still substantially lower than the 20 percent you'd have to pay for a conventional loan, if you can get it at all."

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