Finance World

First time buyers who were getting their first mortgages were traditionally the golden goose for banks because once a bank had their business they usually had it for a long time and they made a lot of money off of them. However, first time buyers are now getting to be less and less important for banks because they are traditionally more risky than buyers who have established credit. So, how are first time buyers affected by the down turn in the economy?

It isn’t that easy to answer this question. To do so, first you must remember what first time buyers got when there wasn’t a credit crunch. Before, first time buyers got a break on the interest rate that they paid or were able to get a mortgage without the traditional 20% down payment. Those who didn’t put a lot of money down on their houses often found that they were in trouble when the economy soured. It was the banks who saw the effects of a lot of first time buyers who couldn’t afford their houses and they are now rethinking their position on these special deals.

So what does this mean if you already have a first time buyer mortgage? Well, the good news is you don’t have to worry if you are sitting pretty with a good interest rate or any other special deal in your home. The results of the credit crunch are going to happen in the future, and people who want to buy their first house now are probably not going to get the same good deals that you did. What they are going to be able to expect is to have to pay more for a down payment, or if they do get a low down payment like five or ten percent, they are going to have to pay a whole lot more in mortgage insurance to cover the risk. This is going to add a lot of money to their mortgage bills every month, making a low down payment mortgage a lot more expensive for them.

With the economy going south, you can probably expect to see fewer and fewer first time buyer deals offered by banks. Mortgages are also going to be getting more and more expensive overall, because the problems in the financial world are going to cause banks to be cautious with loaning out money. Before, banks gave a mortgage to almost everyone, but now, you are going to have to prove that you have good credit and are a good financial risk for the bank. This might actually be good for those with good credit, as it is going to weed out those who buy houses that are too expensive for their budgets. Those who lose their houses ruin it for everyone because we end up paying more in mortgage interest rates and bank fees. However, if your credit rating is less than stellar, these changes might sound discouraging.

Those looking for their first mortgage are absolutely going to be affected in a negative manner by the credit crunch. There is no changing the situation, so hopefully you already have your mortgage in place and don’t have to worry about what the future holds for you.

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