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July, 2004 Newsletter

+++++++++++ July 1, 2004 +++++++++++++++++++

CONTENTS:
Introduction: Re-sales hit record, New sales jump
Mortgage Rate Update: Rates Stabilize
This Month's Tip: Mortgages: More Than Just Rates
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Introduction: Welcome to the July edition of the
Home Buyer's Newsletter, brought to you by the
Home Buyer's Information Center.
The Home Buyer's Information Center

Both existing home and new home sales were at or near records
during the month of May, continuing the blistering sales pace for
2004.

Existing single-family home sales rose in May to the highest monthly
pace on record, according to the National Association of Realtors®.

Existing-home sales increased 2.6 percent to a seasonally adjusted
annual rate* of 6.80 million units in May from a level of 6.63 million
units in April. Last month's sales activity was 15.8 percent above
the 5.87-million unit pace in May 2003; the previous record was
6.68 million in September 2003.

David Lereah, NAR's chief economist, expected the strong performance.
"Fundamentals are still very favorable for a vibrant market. In part,
the record results from a natural 'fence-jumping' by buyers getting
into the market after mortgage interest rates began to rise at a
sharper clip in April," he said. "This may be the last peak in home
sales for a while and existing-home sales are likely to be slower
during the second half of the year. Even so, they will remain at
strong levels and 2004 is on track to be a record."

Sales of new one-family houses in May 2004 were at a
seasonally adjusted annual rate of 1,369,000, according to
estimates released jointly on June 24th by the U.S. Census Bureau
and the U.S. Department of Housing and Urban Development. This is
14.8 percent (±12.0%) above the revised April rate of 1,192,000 and
is 25.3 percent (±12.2%) above the May 2003 estimate of 1,093,000.

The median sales price of new houses sold in May 2004 was $198,400;
the average sales price was $256,700. The seasonally adjusted estimate
of new houses for sale at the end of May was 372,000. This represents
a supply of 3.3 months at the current sales rate.

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Mortgage Rate Update: Rates Stabilize

Mortgage rates remained fairly stable for the month of June after
increases in both April and May. According to mortgage company
Freddie Mac, 30-year fixed-rate mortgages averaged 6.25% for the
period ending June 24th. These rates began the month of June
averaging 6.28%. Averages in 15-year fixed-rate mortgages were
similar, at 5.64% after beginning the month at 5.63%. To put these
rates into perspective, these rates are still at the very low end of
historical rate trends.

The 25 basis point Fed fund rate increase of June 30th will have
some effect on the mortgage market, starting immediately with ARMs--
Adjustable Rate Mortgages. Although the Fed has said that they
are looking to have "measured increases", the key word there, in
our estimation, is "increases". Virtually all analysts expect rates to
continue to rise--the only question appears to be how soon and how
high the increases will be.

For current average mortgage rates, see:
Mortgage Rates
For more information on mortgages, visit the Mortgage
Section at:
Mortgages

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++++++++++++++++++++++++++++++++++++++++++++++

This Month's Tip: Mortgages: More Than Just Rates

When a home buyer begins to consider a mortgage, generally the first
point of reference that they will examine is the interest rate. Quite
naturally this is as it should be, since rates will determine, to a large
degree, the total cost of the mortgage. It makes sense, then, to make
comparisons. In addition, though, there are a number of other factors
which need to be considered, since they will affect the cost of the loan,
the satisfaction with the lender or both:

+ What are the application fees?
+ How many points are with the loan?
+ What are the TOTAL closing costs?
+ How long has the lender or broker been in business?
+ How much experience does the lender have in the type
of loan in which you are interested?
+ Does the lender have a wide variety of programs available?

By focusing only on the rate and downplaying the above factors,
you run the risk of acquiring a mortgage that appears to be the best deal
but may not be the most advantageous.

What are the application fees?

There can be a big variance here from lender to lender. Application
fees can run the gamut from no charge to $100, $300, $500 or more.
This application fee must be disclosed specifically as that or it could
be disclosed as an additional "point" which is 1% of the mortgage loan
amount.

How many points are with the loan?

"Points" are a form of upfront interest charged by most lenders. A
point is equal to 1% of the total mortgage amount. For example, 1
point on a $250,000 mortgage would be $2500, 2 points $5000, etc.
These points are paid in cash at the closing or settlement and
become part of your total closing costs. Obviously, their cost can
add up and have a big effect on your total mortgage cost. As in the
above example, if 2 lenders are offering the same loan rate but
one lender has 1 point and the other has 2 points, there is a
$2500 difference in the total cost between the two lenders, before
any other factors are considered.

What are the total closing costs?

Points (see above) are a big component of the total costs that
are associated with closing, but there are a number of other factors
that will vary from lender to lender. These charges can either be
legitimate (title searches, title insurance, deed transfers, etc.) or
exorbitent "junk fees" (ridiculously high courier fees, underwriting
fees, processing fees, etc.). It is wise to get a clear picture from
each prospective lender as to what the total closing costs will be
to make a fair comparison.

How long in business?

The real estate "boom" of the early 21st century saw a huge growth
in the mortgage industry with thousands of new mortgage companies
and brokers spurting up. Some were staffed with employees with
many years of experience and others employed those that were
brand new in the mortgage business. Usually, the more
experience that is on tap, the better the knowledge of mortgage
procedures, laws and the like.

How much experience in your type of loan?

Although many lenders offer a wide spectrum of loans, others
concentrate on specific programs such as FHA, VA, Conventional,
low- or no-document loans, etc. Having a lender who specializes
in the type of loan you are securing works in your favor, as long
as you want and can qualify for that type of loan. Otherwise,
you will probably want a lender who offers...

Wide varieties of loan programs

A lender who has a wide availability of loan programs can be
a big advantage should you need to switch from one program
to another (for example from a conventional loan to an FHA
loan).

Summing Up

Although the interest rate should be the very first point of
reference when searching for and comparing lenders,
it should not be the end-all of your comparison process.
Take some time to get a clear and TOTAL picture of
competing lenders.

Next Month's Topic: Various Types of Home Inspections

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The Home Buying Checklist

Many of our visitors have said that one of the most valuable
aspects of the Home Buyer's Information Center is the
Buying Checklist, where they can make sure that all
the bases have been touched. You can find the checklist
here:
Home Buyer's Checklist

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 here:
Home Buyers 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 month and good luck in your home buying process!

The Team at the Home Buyer's Information Center

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