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Low demand for home loans: opportunities for buyers?

[May 19, 2010.]


As the traditional home-buying season gets under way, Reuters is reporting that applications for purchase money mortgage loans are falling, with about 20 percent fewer applications as compared to last month. The end of the federal tax credit program may be responsible for the lull in mortgage applications, but overall economic conditions and concerns about unemployment are likely driving reluctance to buy homes. If you're ready to buy, there are several compelling reasons to shop for home loans and your next home now:

  • Low mortgage rates: As rates continue to stay near 5 percent, mortgage loans are close to an all-time low. Buyers willing to take on a 15-year fixed-rate mortgage or a hybrid adjustable-rate mortgage can currently find rates below 5 percent.

  • Home prices remain low: Although housing markets in many areas are improving, prices remain low enough for buyers who were previously priced out of the market. Local real estate pros can provide information on home prices and market trends in your area and for specific neighborhoods where you wish to buy.

  • Mortgage lenders may be "hungry" and willing to negotiate: Although the current lapse in buyer loan applications isn't likely to last, mortgage lenders may be more willing to negotiate. Shop and compare mortgage loans online, and use free mortgage calculator tools for estimating affordability, monthly payments and mortgage loan costs. (We emphasize "estimating" as actual mortgage rates and costs can vary given individual circumstances.)

Down payment assistance programs and FHA loans

If you haven't owned a home for a few years, or are buying your first home, you may be eligible for community and state buyer assistance programs available through state housing finance agencies. These agencies provide low-cost second mortgages for down payments and closing costs. These types of loans typically do not have to be repaid until you sell or vacate the home you're buying. Mortgage lenders and real estate agents can provide more information about buyer programs in your area.

FHA mortgage loans can also assist moderate-income buyers and those with less than spiffy credit; FHA does not make mortgage loans, but insures mortgage loans for its approved lenders. FHA loans require a minimum down payment of 3.5 percent. Ask your real estate representative, mortgage broker, or potential mortgage lenders to compare features and benefits of first-time buyer programs and FHA loans.

For those prepared to buy a home, current markets and mortgage rates are offering great opportunities. If you have doubts about buying, don't be talked into buying a home you cannot afford or don't plan to keep for at least a few years.


About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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