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January, 2001 Newsletter


+++++++++++ January 2, 2000 +++++++++++++++++++
CONTENTS: Introduction
Mortgage Rate Update: Rates Fall to New Low
Recent Site Updates: Buying a Home in a Changing Economy
This Month's Tip: Understanding Contracts ++++++++++++++++++++++++++++++++++++++++++++
Introduction
Welcome to the January edition of the Home Buyer's Information Newsletter. Happy New Year!! We've released the newsletter early this month because there is a good deal happening in the home buying arena--a changing economic picture (see "Recent Site Updates" below) and the lowest mortgage interest rates in over 18 months (see the "Mortgage Update" below). Informed buyers have a real opportunity for a positive impact on their home buying process if they take the right approach.
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Mortgage Rate Update: Rates Fall to New Low
After nearly 18 months of seemingly unending mortgage rate increases, U.S. mortgage rates have fallen to a level not seen since mid-1999. Mortgage company Freddie Mac found that the average interest rate on a 30-year, fixed rate mortgage has declined to 7.13%. This is a decline of over 1.5% from rates from mid-May, 1999. On a 30-year, $100,000 fixed-rate mortgage, a 1.5% rate difference would mean a monthly payment difference of nearly $105.00 per month. 15-year fixed rates are also considerably lower, currently in the sub-7.00% range, down from over 8.00% 18 months ago.

Those homebuyers who have been patiently waiting for rates to fall may have the best of all possible worlds at their disposal. Not only have rates declined appreciably, the normal slowdown period in home sales that occurs mid-winter has meant that there are less buyers competing for good homes, creating somewhat of a buyer's market--a situation that has not existed in nearly 2 years. Add the concern that the overall U.S. economy is not expanding as rapidly as in the past few years and you may have the best environment for both home purchasing and mortgage rates in quite a while-- both competitive housing pricing and lower interest rates.

FHA Mortgage Change
Buyers securing an FHA mortgage after January 1, 2001 have an early New Year's gift. The upfront mortgage insurance premium (insuring the lender against a buyer's default and required on all FHA mortgages) has been reduced one-third from 2.25% of the loan amount to 1.5% of the loan amount. Since this premium is usually rolled into the loan amount (rather than paid in cash at closing) this change will result in a reduction of payments for FHA buyers. For more information on mortgages, visit the Mortgage Section at:
Mortgage Information

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Recent Site Updates: Buying a Home in a Changing Economy
It is fairly obvious that the U.S. economy is slowing noticably. What effect does this have on the home buying process? How can you make the best of the situation? We've added a special report dealing with this subject:
Buying a Home in a Changing Economy You can always find out "Whats New" at the Home Buyer's Information Center at the following location: Site Updates

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Get more information here.


++++++++++++++++++++++++++++++++++++++++++++++
This Month's Tip: Understanding Contracts

Whenever we hear a buyer say "we've made a bid on a house..." we worry because we often also hear "we've made a bid on a house, the seller accepted it and now we've changed our mind." Usually the next question is "how do we get out of buying this house?" In the majority of cases, getting out of buying the house is NOT a possiblity. Understanding how contract law works in Real Estate is an important part of preparing to buy a home. The key words to note here are "contract law" because many buyers have a misconception about the legal ramifications involved. They erronously assume that they will be able to get out of an agreement if they change their mind or find another home more to their liking. They cite non-existent laws with "3 day right to cancel." They have heard--in error--of special considerations for breaking contracts for first time buyers or renters. In general, these considerations do not exist.

Probably the best way to summarize the legal concept is as follows: "If you make an offer to purchase a home and the seller accepts your offer (and you are notified of the acceptance) you now, for all intents and purposes, own a home." The legal definition of a binding contract, enforcable by the seller, has been met: There has been an offer, an acceptance and a notification of the acceptance. We frequently get emails from buyers who have the misconception (which can be an expensive one) that they will have time to back out of a contract if there is a change of heart. The "3 day right of recission" that they quote, unfortunately only applies for sales presentations that are conducted 100% in your current home--as in door-to-door insurance sales or home repair sales. These laws do not apply to Real Estate contracts.

Since an offer becomes a contract upon acceptance of the seller, before you make any offer, it is a good idea to familiarize yourself with the proper components, including:

* An exact description of what you are buying, both in street address and legal description.
* The selling price that you are offering
* Exactly what is to be included in your offer, including, for example, refrigerators, air conditioners, etc. Do not assume that if an item is IN the house it will be included in the price.
* Any concessions--such as closing costs--that you want the seller to make.
* Any contingencies to the contract. Examples would be "subject to a whole house inspection acceptable to the purchaser" (as well as who will pay if defects are found) and "subject to purchaser obtaining a mortgage in the amount of $XXXXX with an interest rate of no more than X.XX%"
* Exact date and place where the buyer's settlement (closing) is to take place.
* Any other item or contingency that is of importance to the purchaser and would affect the desirability of the property.

Most Real Estate Agents will have pre-written contracts available which will incorporate all of the legal aspects, most of the components that are listed above as well as additional areas where the purchaser can add items of importance. In addition, a Buyer's Agent can assist a buyer in structuring an offer that is advantageous to the buyer rather than the seller. Additional information available on the site:

Offers

Contracts
Buyer Agents

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 at 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 start to the New Year!

The Team at the Home Buyer's Information Center

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