How the Recession Can Benefit First-Time Homeowners

Contrary to popular belief, those looking to become first-time homeowners may be able to benefit from an economic recession. In addition to lower home prices because people looking to sell need to sell quickly, interest rates are lower to entice buyers into the market. Tax incentives are also a great benefit. Lastly, there are a variety of programs designed to help first-time homeowners with down payments so they can close on their loan.

Buyer's Market

In a recession, it becomes a buyer's market because more people risk foreclosure and are looking to sell their homes to move to less expensive areas or smaller, less expensive homes. A lot of sales move quickly to avoid foreclosure or to help the bank recoup more of the money lost in a foreclosure. With so many homes available, there are a lot of options for those who are looking to become first-time homeowners. Sellers are looking to get rid of homes quickly, meaning they are much more likely to help with closing costs and other aspects of the home buying process to entice buyers to choose their property over others on the market.

Reduced Interest Rates

The Federal Reserve will lower interest rates periodically, to help provide more incentive for first-time home buyers. When interest rates are low, the mortgage does not cost borrowers as much. This makes it easier for them to qualify for a higher loan, and makes the loan more affordable. Reduced interest rates also make it a good idea for existing homeowners to refinance their loans.

Tax Incentives

As part of the plan to grow the economy, the government implements a series of tax credits for people who buy homes during a certain period of time. These credits help people compensate for closing costs and provide a nice cash cushion at the end of the year that they can, in turn, apply to their mortgage payments if they so choose. It is important to stay apprised of what the various tax credits are because they can change frequently and will have deadlines attached to them. For instance, to qualify for the 2009 $8,000 tax credit, the home must be closed on by November 30th.

Assistance Programs

While the programs may be more limited than in a booming economy, there are still assistance programs to help people take care of down payments and other closing costs to ensure they can get in their homes. The Department of Housing and Urban Development is a good place to start in locating various assistance programs for first-time home buyers. Check with local banks and other lenders to see if there are any assistance programs to qualify for that would help get a loan for a home.

During a recession, first-time homebuyers can take advantage of many different private and government-sponsored assistance programs. Even buyers with less-than-perfect credit have options to help them become homeowners.