Obstacles for First Time Home Buyers

Even though housing prices are more affordable than they have been in years, many first time buyers are hesitant to enter the market. They face obstacles like a lack of income, low credit scores, and inexperience. Fortunately these obstacles can all be overcome, and first time real estate buyers can take advantage of this buyer's market.

With the goal of helping struggling homeowners and others hurt by the economic downturn, President Obama is injecting billions of dollars into the American economy. He is also providing much needed tax credits to entice first time home buyers into the beleaguered housing market.

Tax credits can help people enter the real estate market for the first time in several ways. The first is that tax credits may increase a buyer's income enough to qualify for financing. Having too small an income is one of the major obstacles that young people face when they go to buy their first home. The new Credit for First Time Buyers is approximately $8,000 for those who make less than $75,000 a year, and can be used as a down payment. As an added bonus, buyers don't have to repay this money.

Another obstacle that first time buyers face is having bad or nonexistent credit. Lenders have tightened up their lending regulations, so borrowers are required to have a solid credit report before they can secure a mortgage. If your credit score isn't that great right now, don't worry. You can work on building up your credit over the next year or two, and greatly increase your chances of getting favorable mortgage terms.

In order to do this, before you start saving for your down payment, you need to pay off your credit card debts and anything else that may be in arrears. If you are disputing any of the charges, make sure there is a note to that effect in your credit report. If the case really is valid, a lender will take this into account, but you must have the paperwork to prove that the dispute is still ongoing.

Young buyers also struggle with a lack of experience, and the ability to see a property's true potential. Many first time buyers enter the real estate market by purchasing something like a condominium, or a smaller, older house.

Real estate agents are used to looking at properties like older homes, and envisioning how great they can be with a little love. This ability to see potential in a home is a skill that not everyone is born with, and it's not easily learned.

Once first time buyers are given guidance, they often attack the plan with enthusiasm and become qualified do-it-yourselfers! This is just one of many reasons that having a buyer's agent is a good idea—especially for first time buyers. Having someone knowledgeable and experienced to lead the way can make the entire process much easier.

The final part of the puzzle is self confidence. It is very courageous to take the plunge and enter the market these days with all the talk of foreclosures whizzing around your ears. Fortunately, lenders are ruled by stricter legislation, which reduces your risk of getting a loan you can't afford. With responsible spending and saving, and the new tax credit in place, first time buyers are in a great position to enter the market for the first time, which will help stimulate the economy for us all.