It's a buyer's market, yet everyone is talking about the difficulty of the sub-prime loan market. The impact of the sales of homes to the nation's first time buyers is huge. But a number of indicators, from the affordability index, to the slower sales of homes in 2007, are concerning to both real estate professionals and the national economy.

While the National Association of Realtors (NAR) predicts that sales of homes will pick up in 2008, many of the problems that first time homebuyers are experiencing are bigger than that. The number of homeowners in the 25 to 29 year old age range has decreased steadily since 1990. And in 2006 the cost of starter homes rose to an average of over $96,000 as compared to $72,000 in 1980.

This average is far from representing the cost of homes in the country's highest priced housing markets- where it's impossible to find much of anything below $300,000. According to a recent article from the Silicon Valley Association of Realtors, entry-level homes in that area go for around $480,000. This requires an average income of over $96,000 just to get a mortgage loan.

Impact of Homes Sold to First Time Buyers

When the increasing cost of homes is combined with increased difficulty in obtaining affordable mortgages, first time homebuyers often find themselves stuck. A young person starting out often struggles to come up with a sufficient down payment for the homes in his or her market. Or they may have credit issues that make obtaining a loan challenging. But this doesn't only affect those first time buyers of homes. It affects everyone in the real estate market.

Homes sold to first time buyers allow the rest of the market to move up. If sellers can't get out from under their starter homes to move into the pricier markets- sales slow down overall. Higher priced homes won't sell if no one is available to buy them. So it's in everyone's interest to insure that first time buyers are able to afford homes.

How to Get First Time Buyers into Homes

First time buyers looking at homes, especially in high priced areas, need to do a couple of things. The first is to get their finances in order. The second is to look for government-subsidized programs.

Before first time buyers even begin to look at the homes for sale, they need to look at their credit score, purchases, and cash on hand. It's a good idea for a first time buyer to take six months to a year to rebuild credit and save up cash for a sizeable down payment. Most homes purchased will require PMI (Private Mortgage Insurance) if less than 20% is put down up front. That amount, combined with the credit score, will help determine the interest rate and mortgage that the buyer can qualify for. And potential buyers should avoid any other major purchases that could impact their credit score and available cash on hand.

Finally, there are a number of government sponsored programs and loans designed to help first time buyers into homes of their own. Specific groups like minorities, public servants, and hurricane victims can qualify for these programs. While the market may seem challenging, the more proactive a buyer is, the more homes are available to him.