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Linknet-Blogs.com features a number of marketing blogs in specific areas of interest such as Marketing, Travel, Health, Business Opportunities, Product Features, Golf, Real Estate. Advertise with Linknet-Blogs.com. Get links and create a powerful online presence. Buyers may get trapped with zero down mortgagesJan 20, 2006 - Linknet Finance News Buyers may get trapped with zero down mortgages Jan 20, 2006 - Linknet Finance NewsAccording to the latest survey by the National Association of Realtors, 43 percent of first-time buyers used a no-money-down loan to buy their home. In other words, they financed 100% of the cost of their home. Most independent financial consultants advise against this kind of purchase, recommending a more traditional downpayment of between 10 and 20%. But obviously with 43% of new home buyers opting for this approach, most are not listening. --------------- Loan Officer Training - How to be a Loan Officer --------------- The reasons for caution are pretty obvious. Now that real estate is cooling off a bit, and the rate of real estate appreciation is decreasing in many parts of the U.S., many of these owners could end up owing more than the market value of their homes. Part of the reason for this trend is that builders and finance companies are luring younger buyers into the market with easy credit. The survey found that the average age of first time buyers was down to 32 years, and the median household income was around $ 57,000 a year. Many of these first time buyers simply cannot save a downpayment. So with interest rates at historic lows, and builders, real estate and mortgage companies eager to keep the boom going, credit has become easier than ever. Buyers are also using the additional easy credit to buy more expensive homes than they could otherwise afford. In other words, they may be getting in over their heads. If there is even a hint of an economic slow down, or if home prices level off, many of these first-time buyers will be paying agents and lawyers out of their own pockets when they sell their homes. And that will make moving to another purchase even more difficult. Hottest areas are also the most vulnerable Buyers are most vulnerable in areas where price increases have been the highest over the last four or five years. There will be an inevitable "correction" in some of these areas where price increases will level off. Most of these reagions are along the east and west coasts, including cities such as Sacramento, San Diego, Los Angeles, Boston, Providence and Long Island. It is expected that real estate activity will cool off slightly in these areas. There are already signs of this, and projections of sales being off as much as 4 or 5% from the record highs set in 2005. Investment hot spots have already started moving inland to less pricey cities, like Austin and San Antonio. According to analysts, this does not mean pricess will necessarily go down. But it does mean that we are entering a "transitional market" as some areas move away from a seller's market to a buyer's market. That will make it harder to get the price you expected a couple of years ago. Sales will also take longer as more houses come on the market. With more to choose from, buyers inevitably will become more selective and more price conscious. What to do in the meantime Buyers who find themselves caught in this kind of price squeeze are not completely helpless. They can still make principal payments against their mortgage to cushion the possible shock later. But with many first time buyers carrying maxed out credit lines, saving a bit for the future, or paying down debt is never easy. Finance Matters Blog Promotion for Real Estate Agents
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