February, 2000 Newsletter
+++++++++++ February 15, 2000 +++++++++++++++++++
Mortgage Rate Update: Up and Down...
Recent Site Updates: Setting a Value on a Home
This Month's Tip: Downpayments
Welcome to the February edition of the Home Buyer's
Information Newsletter. It is beginning to look as
though there will be an early jump on the spring home
market again this year, as many areas of the U.S. and
Canada are beginning to see activity that normally
does not begin until early to mid-March. In most
areas, housing inventory is at reasonable levels,
meaning buyers have a decent range of choices, an
advantage compared to the situation that existed
in much of 1999.
Mortgage Rate Update: Up and Down...
But mostly up. Rates continued a slow but steady
rise in late January and early February. Although
the net increase has not been budget-breaking for
most home buyers, the trend--even with some up and
down weekly variations--has been in an upward
direction. Early February averages in the U.S. have
been in the 8.15% range for 30 year fixed mortgages.
In Canada, 3 year closed term rates have been in
the 8.25% range.
Some analyists are predicting a bit more stability in
the coming months while others are looking for some
additional small increases. Not many, though, are
projecting any substantial decreases in rates.
Additional mortgage information, hints and questions
can always be found at:
Recent Site Updates:
Setting a Value on a Home
Visitors to the Home Buyer's Information Center often
ask about making offers on homes. Questions we hear
often are "How much is a fair offer?" and "How far below
the listing price is a good place to begin negotiation?"
To make an intelligent offer--and one that is
more likely to be accepted--it is important to know
the components of house pricing determinations. We've
added a new section devoted to this topic at:
One of the very first steps, according to most
experts, in securing a mortgage is to get an up-
to-date copy of your credit report. Consumerinfo.com
offers the availability of not only a free copy of
your report but also 30 free days of their Credit
Watch monitoring service.
This Month's Tip: Downpayments
One of the most frequent questions from visitors to
the Home Buyer's Information Center concerns
downpayments on a home. "How much downpayment will
I need?" Unfortunately, there is no single--or
simple--answer. 0%, 5%, 10% and 20% or more are all
correct answers to the question. Different situations
will require different levels of downpayments. Some
of the major factors that will affect downpayment
* Type of mortgage (VA, FHA, Conventional, etc.)
* Availability of any special mortgage programs
* Credit history of the borrower(s)
* The property appraisal
Type of Mortgage or Mortgage Program
The most common determinant of how much downpayment
will be needed is the type of mortgage you select
and are qualified for. In general, FHA(Federal Housing
Administration) mortgages will require the least
downpayment--often 3-5% of the selling price. FHA loans
will have maximum loan caps--limits to the amount that
can be mortgaged--depending on the area in which the
property is located. Qualified military veterans may
be eligible for VA--Veteran's Administration--loans
which have the availability of 0 downpayment.
Conventional mortgages often require a minimum of
10% down, although there are occasionally lower
downpayment options available. In Canada, a
conventional mortgage is for a mortgage amount not
in excess of 75% of value, requiring a 25%
downpayment. It is wise, therefore, to have a firm
grip on the amount of downpayment you will have
available so you don't waste time and money applying
for mortgages with requirements you can't meet.
Another important determining factor regarding down-
payments is your personal credit history. Those who
have excellent records of paying accounts as agreed
will have the widest possible availability of down-
payment programs. Those with credit blemishes or
problems will have less options--often requiring the
mortgage lender to use a program which may require a
20% (or more) downpayment in order to lower the
lender's risk. In general, the better your credit the
more opportunity you will have for a lower downpayment
and the worse your credit, the more likely that a
larger downpayment will be required.
A less common, but potentially determining factor in
downpayments is the lender's appraisal of the home.
If, for example, you have a purchase agreement to
buy a home for $175,000 and the appraiser's value
determination is $168,000, that $7,000 difference
will have to be dealt with. The seller can reduce
the selling price by $7,000 or the buyer can increase
their downpayment by that amount (or a combination
of both). In any case, the lender will use the
appraisal as the basis for loan value rather than
the contracted sales price.
Where can I get my downpayment?
In general, any funds used for downpayments on
mortgaged real estate must come from savings. No
money can be borrowed from any source--no credit
cards, no personal loans (not even from family or
friends), no credit lines can be accessed. You may,
however, be able to receive a gift of funds for your \
downpayment. Your lender will be able to discuss
availabilty and requirements. If it is your first
home, you may be able to access your retirement
accounts without penalty. See the discussion at:
for more information.
What about "nothing down" deals?
Except in the minds of the infomercial gurus you see
selling their books and "training courses" on TV,
nothing down deals are few and very far between.
The reality is fairly simple--there just are not that
many sellers who can (or will) sell their homes without
a penny going into their pocket. In fact, to sell to
a buyer with nothing down would actually mean that the
seller would have to reach into their pocket to pay
for costs associated with selling a home (commissions,
deed transfers, etc.) This is not to say that nothing
down deals NEVER occur, just that to concentrate on
trying to find one is almost always a colossal waste of
Don't forget about closing costs!
As you begin to compute the cash needed to purchase
a home, don't forget about the costs associated with
the closing or settlement of your purchase. The
amount can vary from location to location and in the
type of mortgaged selected, but as a rule of thumb
you will need 3-5% of the selling price in cash at the
time of closing. Again, none of these funds can be
As always, if you have suggestions for improving the
site, or topics you would like to see addressed in
this newsletter (or, if you have used the Home Buyer's
Information Center to successfully purchase a home),
drop us a quick line to:
or access our feedback page at:
Have a great February and early March...Spring is just
around the corner!
The Team at the Home Buyer's Information Center