NEW YORK, Feb. 14, 2013 /PRNewswire-iReach/ -- According to the National Association of Realtors, 34% of the home buyers in July 2012 were first-time buyers. That may sound great, but the truth is -- when we're in a healthy economy, first-timers account for at least 40% of those purchases! What's behind the decrease? Some people are simply reluctant to deal with the housing market altogether -- instead, opting to rent until the economy improves. Others can't wait to get the keys to their first home, but they just can't swing it financially yet. And, remember, salaries for 20-somethings keep getting lower -- while student loan debts keep getting bigger. If you'd like to be a first-time home buyer sooner rather than later, here's what you need to do:
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If you don't have enough money saved up to make at least a 10% down payment, forget about buying a home right now. After years of requiring little or no down payments, lenders have started asking for more money upfront since the bubble burst. The same goes if you have a credit report that's got some red flags on it. If your credit score isn't at least 620, most lenders won't even talk to you. Once you realistically assess yourself as a buyer, see what you can do to improve. By understanding exactly what you need to qualify -- and seeing how far you fall short -- you can come up with a plan that gets you in a better position to buy sooner.
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2.Don't be intimidated by the competition
If you're interested in a lower-priced home, odds are you'll be competing with an investor who's willing to pay cash. (Don't think that happens in real life? Tell that to Miami home buyers -- 65% of which paid cash for their houses back in June!) If your competition is willing to pay cash, the seller will likely pick him. After all, the seller doesn't have to worry about a lender getting in the way! If this happens to you, realize you're not alone -- and keep trying. If you want to try to prevent it from happening, get pre-approved. Your lender will still have a say as to whether they'll write a mortgage for that specific house, but it puts a little more in your corner when you're competing with someone else.
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3.Cool it with the spending
If you go out and get a couple of new credit cards or start making big purchases (like fancy new gadgets in preparation for that new home you think you're moving into any day now), it can throw a wrench in your otherwise-good credit rating. Why? By racking up more debt, you make yourself look riskier to lenders. Even if you can still qualify, you'll probably wind up paying higher mortgage rates.
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4.Look at your debts
Just because you get approved for a loan doesn't mean you can actually afford it. If you don't want to end up being one of the millions of homeowners in foreclosure (or one of the millions more who have missed at least one payment), you need to take a long look at your debts. The best way to do that is to calculate your debt-to-income ratio: Let's say you make $60,000 a year before taxes, health insurance deductions, etc.. That means your gross monthly income is $5,000. Now, let's say you have $2,000 worth of "liabilities" every month. Those are the debts that you have to pay off, like your car payment, your student loan payment, your credit card bills, etc. That means your debt-to-income ratio is 40% -- or, that 40% of your gross monthly income goes towards paying off debts. That doesn't even include a mortgage payment, homeowners' insurance, property taxes, and everything else that goes along with buying a house! When you look at it that way, you might not be as ready as you think.
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