First Time Home Buyers Far From Extinct – Boston Home Loan Report

In 2008, the mortgage fixed rate for a 30 year loan was 6.46 per cent and were people getting mortgages? No. And why not?

They were waiting for the rates to drop, which they did. As rates on home loans approached historic lows back then, wannabe borrowers held off, on the assumption that in a few weeks they will get even lower.

Jump forward 4 years and the current fixed mortgage rate in Massachusetts is hovering around 3.47 per cent-ish, a record low since 1950.

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Yet, given the low cost of borrowing and potential for discounted properties in Boston due to foreclosures, first time home buyers are still not entering the market in force.

So why aren’t first time homeowners buying?

Mostly likely negative media reporting is driving down consumer sentiment and confidence.

If house prices aren’t rising, buyers will hold off and invest elsewhere for fear of negative equity.

Its election season – perhaps young buyers are holding off to see if there will be a new President and the effect that will have on the economy.

With the fear of having a huge mortgage and endless foreclosures, it may seem daunting for a first time investor to take the plunge and enter the housing market. But in the long term, history shows us that, despite property prices going through a cycle of boom and bust, owning your own home remains a fairly wise investment choice.

When looking for a new property, take your time. There is no need to rush in. House prices in Boston are dropping and interest rates are bordering an all time low. There is plenty of time to educate yourself with the process and learn the market.

Most important question – how much can you afford?

The first step to buying your first home is knowing how much you can spend. Monthly gross income, credit, credit history and the down payment will all factor into how much you qualify for. And don’t necessarily decide that you have to go for the max.

Go onto to your mortgage lender’s web site (e.g. here) and try their mortgage calculator. Here you will get an idea of monthly mortgage repayments, interest rates and other expenses you’ll need to take into account.

Which home loan is right for me?

Variable or fixed?

Fixed loans are great if you think rates are going to rise and you want to know exactly how much your repayments will be each month.

Or you might want the flexibility of a variable home loan. Third option is to fix half and have the other half variable.

Whatever mortgage you decide to go with, remember the one with the lowest interest rate may not necessarily have the lowest ongoing rate, so make sure you compare features which are relevant to your lifestyle and financial needs.

Everyone has their own individual circumstances.  If you do decide to take advantage of the favourable buying conditions and low interest rates, carry out extensive research on your target property and the suburb it resides in.

There are some bargains to be had at the moment, so if the numbers stack up and you find the loan that suits you, it could well be the time to join the property ladder.

Phil Ganz (354 Posts)

Philip D. Ganz is a Boston Mortgage Broker and Boston Home Loan specialist. For information, expertise, consulting, or advice about home loans, refinancing mortgages, or commercial property loans, contact Phil with no obligation: 617-529-9317

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