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| Lenders Seek New Ways to Lure First-Time Buyers |
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(August 25, 2006) --
As the housing market settles down, lenders are searching for new ways to boost their business by turning renters, and particularly minority renters, into first-time buyers.
"There's money to be made by targeting this segment of the market because it is underserved and growing," says Lorrie Blevins, Freddie Mac's western region manager for housing and community investments.
Between now and 2010, 15 million first-time home buyers will enter the market, according to Freddie Mac. Minorities will account for nearly 65 percent of them. Indebted college graduates, single parents, and young married couples will comprise much of the balance.
Offering a winder range of mortgage products is key to reaching the first-time buyer market. Certainly, credit is more plentiful than it once was. Last year nonprime loan originations - those based on middling credit scores - comprised 21 percent of the market compared with about 5 percent a decade ago.
Meanwhile, a measure to raise Federal Housing Administration loan ceilings, extend loan lengths, and drop downpayment requirements from 3 percent to zero passed the U.S. House and went to the Senate in June. If approved, the door would open even wider to first-time buyers.
However, with so many loan options availabe, first-time buyers must think long term when negotiating a loan. Choosing the wrong one could put them in a financial bind down the road.
"With housing softening and interest rates (higher) I don't think now is the time for an adjustable rate loan," says Tim Riddiough, director of the Center for Real Estate at the University of Wisconsin. "It's like Warren Buffett says, you don't know who's swimming nude until the tide goes out."
Source: Investor's Business Daily , David DeVoss (08/24/2006) |
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