Low Mortgage Rates and Short Sales Lure First-Time Home Buyers

Posted by  on May 21, 2009

Low mortgage rates, falling home prices, and readily available FHA home loans have created a perfect storm for first time home buyers. However, many families looking for bargains in today's topsy-turvy real estate market must compete with speculators who convince distressed property owners into short sales. These speculators line up cash buyers, ready to pay more for the same homes.

Same-day flips may help mortgage lenders clean up their portfolios, but they often leave sellers on the hook for outstanding debts. Furthermore, this strategy makes it harder for first-time home buyers to find bargains in their neighborhoods. Short sellers often prefer to collect a fast cash payment so they can avoid foreclosure. Mortgage processing delays knock many families out of contention for the best home values.

Expert mortgage lenders offer some advice for families that want to use FHA loans to purchase distressed properties:

  • Get friendly with lenders. Developing a relationship with an underwriter or with a bank manager can help you save money. Ask your prospective lender whether any of her current customers may be willing to sell their distressed properties. A growing number of mortgage lenders can facilitate short sales to other customers instead of pursuing public foreclosure.
  • Get pre-qualified early. Shop rates online to find the best deals, then use a mortgage calculator to learn how much home you can afford with your current budget. Having a price in mind and a check ready to go can help you compete with fast cash speculators.
  • Bid on FHA homes. Approved mortgage lenders can facilitate FHA rehab loans for properties seized by the government. Some HUD properties come with cash incentives and tax breaks for families ready to improve their new homes.

Although looking for prospective short sales may limit your home buying options, financial experts note that a combination of rehab loans, tax credits, and long term prospects for appreciation may make a distressed property the best property for a first-time home buyer.


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