While the housing market is on the mend, one group of consumers that is still having a particularly difficult time is first-time buyers.
While the number of non-distressed properties in the United States has been increasing in the past few months, the number of non-distressed properties purchased by first-time buyers has actually been decreasing from June to October.
First-time buyers are needed to both expand the housing market as well as purchase distressed properties to bring down the rate of troubled homes in lenders' portfolios. Risk assessment tools could help reverse this trend, by helping lenders determine qualified borrowers, especially first-time buyers with limited credit history, and reducing the number of distressed properties.
Buyers find difficulties in financing
HousingPulse found the percentage of first-time buyers in the market has been decreasing, and hit the lowest amount this month in the survey's history. It also explained that first-time buyers are having a harder time making purchases between rising housing prices and still-hesitant banks. One reason in particular is higher premiums of Federal Housing Administration insurance for the half of first-time buyers that use FHA financing. These premiums are expected to rise again in early 2013.
Other regulations have kept first-time buyers from mortgages, including much higher down payments than before the recession. Though down payments have been declining since 2010, they are still higher than the years before the financial crisis.
Foreclosures and short-sales have also been overtaken by investors, leaving few affordable housing options for first-time buyers. As a result, rent prices are increasing and apartment vacancies are declining since some buyers have no other choice but to rent.
Though distressed properties are becoming less of an issue, unless qualified borrowers are able to make home purchases the housing market will grow at a slower pace. Loan origination software allows resistant lenders to make loans while keeping the number of distressed properties to a minimum.