With the 40 year amortization and the 0 % down payment coming into the picture not too long ago, it’s been easier for first time home buyers to get into the real estate market quicker. Not only that, but with the real estate prices the way they are, it seems these are the only options for first time home buyers. But now with the federal government basically putting a stop to 40 year amortizations and 0% down payment by October 15th, first time home buyers may have to revert back to the old fashioned saving up in order to afford.

These new rules affect those who have less than 20% downpayment and are intended to help protect lenders in the case of default, thus, 40 year amortizations and 0% down payments are too risky. Coming October 15th, those who have less than 20% downpayment and therefore, will need mortgage insurance, will be required to put at least 5% down.

First time home buyers can have the option of borrowing a loan from a bank to get the required 5%, however, the interest rates would likely be higher. Or, another option is saving up. Remember when your parents and your parents’ parents would save up for years in order to afford a home? Sure they didn’t have 40 year amortization back then, nor did houses cost as much as they do now, but the simplest plan of cutting spending habits and increase savings can make a big impact. You can have the option of pre-authorized withdrawals every week or month into a high interest savings account. Yes this option may take you 5 more years to save up, but in the long run, it will save you from having to borrow from another bank.