How the Crunch on Credit is Bad for First Time Buyers

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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.

You may be asking what is going to happen with your current first time buyer mortgage. If you have already signed the deal and have a low interest rate or other special, you don't have to worry about a thing. Those who are now looking for a first time buyer deal are probably going to be affected by the problems with the economy. Current mortgage seekers can expect to need a higher down payment, and if they do get approved for a low-down payment on their house, they are going to need to carry insurance to protect the bank. This is going to increase the amount of fees that they pay every month, making this deal not so good of an option.

Also, you can probably expect to see fewer first time buyer deals offered by banks. Add to that the fact that mortgages are going to get more and more expensive because banks are going to be more careful with their money because of the bad economy. In the past almost anyone could get a mortgage, but in the future, you are going to need to be financially secure and do a lot more in order to secure a mortgage. This can be an advantage if you are someone who has good credit, because you are going to have to pay less for those who ruin the system by foreclosing on their homes. When someone defaults on their mortgage, a little bit of that mortgage is passed onto everyone else in the form of higher interest and fees. If your credit score is not so hot, you might not be so happy to hear about these changes.

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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