PARAMOUNT MORTGAGE - LENDER'S BLOG

"For the first seven months of this year, the first-time buyer market share has been remarkably steady, ranging from 32 to 36 percent of existing home sales," reports Steve Cook, Vice President at Reecon Advisors, an independent real estate economics and information company.

The National Association of Realtors (NAR) supplied the data which was culled from their monthly member survey for the spring and summer buying season.

"Even though first-timers are saddled with higher down payments, tougher credit requirements and mortgage approval delays," says Cook, "those are not the deal killers that they are often thought to be."

Coming up with the down payment is still the biggest obstacle to buying a first home. However, "today's first-timers have found several ways to deal with higher down payment requirements," says Cook.

FHA remains the financing of choice for most first-time buyers even with the new higher fees and tighter credit standards. FHA's 3.5 percent down guaranteed loan program has experienced a market share increase from 3 to 30 percent since 2006.

Home buyers have also discovered the no down payment USDA Rural Development (RD) guaranteed loan program. The USDA-RD program recently raised fees, but is funded with $12 billion a year to guarantee loans.

Cook says that even with "today's credit requirements and documentation" the USDA-RD program requirements "are not much tougher than they were 20 years ago."

Today's rates are at all-time lows. Home prices have fallen 30 percent below levels of four years ago. Rents are rising and rental choices are dwindling. Many realtors might ask "why aren't first-timers buying more than they are?"

Fannie Mae's recent National Housing Survey has some clues. Future expectations rather than current realities are keeping buyers at home.

"The September survey showed a marked deterioration in consumer expectations of home prices over the next year," says Doug Duncan, vice president and chief economist of Fannie Mae.

"At the same time, the share of consumers expecting mortgage rates to go up dropped sharply," says Duncan, because they are "likely influenced by the news that the Federal Reserve will attempt to keep interest rates low for years to come."

There seems to be a "lack of a sense of urgency to buy homes," offers Duncan.