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February, 2001 Newsletter


+++++++++++ February 1, 2001 +++++++++++++++++++

CONTENTS:
Introduction
Mortgage Rate Update: Lower Rates Continue
Conventional Loan Limits Increased
Recent Site Updates
This Month's Tip: Choosing the Right Mortgage
++++++++++++++++++++++++++++++++++++++++++++
Introduction

Welcome to the February edition of the Home Buyer's
Information Newsletter. January was a reasonably
stable month for home buyers, with interest rates
remaining at their relatively low rate and market
activity--at least in resale homes--in line with a
traditional mid-winter slowdown. New home sales in
December, however, posted the biggest jump in 7 years.
Overall, housing inventories are at a reasonable level
in most areas. There has, however, been a
boom in refinancing in the last 2 months which may
indicate a desire of some homeowners to remain, at
least for the present, in their current home. This
may have some effect on the number of new listings
available later in the year.

+++++++++++++++++++++++++++++++++++++++++++++
Mortgage Rate Update: Lower Rates Continue
Although there have been a few minor gyrations in
rates in the last month, overall they have remained
fairly close to the 18 month low that was reached
early in January. Although the 1/2 point decrease
by the Federal Reserve Board does not directly
affect mortgage rates, the psychological impact may
work to maintain rates on the low side.
Still sitting on the fence? Waiting for further
decreases in rates--especially in the spring--can
be a gamble. If (a big IF) rates do fall a bit
further, you may be contending with a re-energized
home market which usually translates to higher
prices due to increased competition among buyers.
A 1/8 or 1/4 percent saving in mortgage rate is
quickly washed away by a $2000 increase in the
price of a home.

Loan Limits Increased
Those home buyers looking for a conventional
mortgage with a loan amount over $250,000
("Jumbo Loans" which are usually at a higher interest
rate) have some new found breathing room. Fannie
Mae's and Freddie Mac's (they buy the bulk of conventional
mortgages) loan limits have been increased to
$275,000 on single-family homes. This means that
more buyers will be able to take advantage of
conventional loans (and rates).

For more information on mortgages, visit the Mortgage
Section at:
Mortgage Information

++++++++++++++++++++++++++++++++++++++++++++++
Recent Site Updates:
It is the best time in nearly 2 years for mortgage
rates. What does this mean to the homebuyer in
early 2001? See the article devoted to the subject at:
Interest Rates Decline

With all of the books relating to home buying that
are available, how do you choose the best? We've
reviewed each of the titles in our Bookstore and
have listed our recommended sources of information
there.
HomeBuyers Information Center Bookstore

You can always find out "Whats New" at the Home Buyer's
Information Center at the following location:
Site Updates
++++++++++++++++++SPONSOR++++++++++++++++++++
Credit Reports
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.
Free Credit Report
++++++++++++++++++++++++++++++++++++++++++++++

This Month's Tip: Choosing the Right Mortgage

Since committing to a mortgage is a long responsibility--
15 to 30 years if you stay in the home--it is extremely
important that you get it right the first time. Yes,
refinancing may always be a possiblity if you select the
"wrong" mortgage, but that entails additional closing
costs and expenses and exposes you to the possibility of
higher interest rates, making refinancing difficult if
not impossible.
Getting a mortgage "right" the first time need not be a
daunting prospect if a buyer spends a little time planning,
taking into account some of the factors that will influence
the choice of the mortgage best for their needs--both current
and future.

Some of the factors that will help you select the best
mortgage:

LENGTH OF TIME IN THE HOME
If you plan to be in the home 5 years or less, an adjustible
rate mortgage (ARM), with their low introductory rates, may
be a good choice. If you plan to be in the home 5 years or
more, a fixed mortgage, especially with today's low rates,
is probably a better choice. With todays low interest rate
environment, though, the difference between the rate on an
ARM and a fixed mortgage can be small, so be certain to
closely investigate both.

AMOUNT OF DOWNPAYMENT
Historically, downpayments of between 10% and 20% were common.
In the last 10 years or so, downpayment obligations have been
reduced signficantly. For example, it is now much more
common to get an FHA (Federal Housing Authority) mortgage with
a downpayment as low as 3% to 5%. Qualified military veterans
have access to VA (Veterans Administration) mortgages with
0% downpayment availability. There are, however, limits to the
amount financed on these programs. If you have funds totalling
10% or more (plus closing costs) a contentional mortgage may be
more advantageous, due to a wider variety of loan products and
rates.

TERM
Many buyers simply assume a 30 year mortgage is the best way to
go, often not even considering a shorter term. For many of us,
a 30 year term may be the only option due to financial constraints
--it may be the only mortgage we can afford. Still, since the
difference between a 15 year payment and a 30 year payment is
not as large as is often assumed (it's not, for example, double
the payment) it is important to make comparisons. For example,
on a $100,000 loan amount at 7.75%, the difference between a 30
year payment ($716) and a 15 year payment ($941) is $225 per
month, but over the term of the loan the interest savings would
total over $88,000!

EMPLOYMENT
If you have been self-employed for a number of years and have
good records (and tax returns) getting a mortgage should not be
difficult. If, however, your self-employment is of short duration
or is difficult to verify, normal mortgage channels generally will
not work. There are options, though, with "no document" or "low
document" mortgages where the lender does little or no
verification of employment or income. More information on
the site:
Mortgage Choices

PMI (Private Mortgage Insurance)
Private Mortgage Insurance is an additional charge that will be
added to the vast majority of conventional loan payments with a
downpayment of less than 20%. This insurance protects the lender
against the buyer's possible default, and can add $25, $50, $75 or
more to the payment, depending on the amount financed. Although
PMI will be required, it really has no benefit to the buyer, so it
makes sense to try to avoid this charge by maximizing your
downpayment. Many buyers find it advantageous to purchase a home
at the low end of their qualifying range rather than the high end
if they can arrange 20% down on the lower priced home. In this
case, they receive a double benefit: Less payment due to the
lower amount financed AND less payment due to the lack of PMI
on the loan.

SUMMING UP
Since there are numerous factors that influence your mortgage
decision, you'll need to spend at least a little time weighing
options. Many mortgage lenders will have several programs from
which you can choose the best plan for your personal situation.
Some mortgage sources are:
* Full Service Banks (both local and national) which offer
mortgage loans as part of their services.
* Mortgage Companies that are exclusively devoted to servicing
mortgages.
* Mortgage Brokers which represent a number of different lenders
and programs.
* Online Sources that are not actual lenders but a "Mortgage
Marketplace" where you can submit a single loan request form and get
competing offers from different lenders.
You can find more information on choosing a source at:
Mortgage Choices
For a full discussion on all aspects of mortgages, see:
The Mortgage Center


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 or access our feedback page at:
HomeBuyers Information Center Feedback

A special thanks to all those who have written to let us know
that they have found the Home Buyer's Information Center a
helpful resource in their buying process.
Have a great February and good luck in your home buying process!

The Team at the Home Buyer's Information Center

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