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June, 2002 Newsletter

+++++++++++ June 1, 2002 +++++++++++++++++++

Introduction: New and Resale Activity
Mortgage Rate Update: Rates at 6 Month Low
This Month's Tip: Understanding Appraisals

Welcome to the June edition of the Home Buyer's
Information Newsletter. Sales of both new and resale homes
jumped in the month of April. Sales of existing homes surged 7.0
percent according to the National Association of REALTORS.
Sales of previously owned homes rose to a seasonally adjusted
annual rate of 5.79 million units last month from an upwardly
revised 5.41 million in March. Sales of new single-family homes
rose 1.0 percent in April to a seasonally adjusted annual rate of
915,000 units.

The housing market continues to show strength in both units
sold and price appreciation. Although some experts expect
this level of activity to continue, others have some doubts about
it's sustainability, especially in terms of price appreciation. More
than ever, it means that a buyer must be fully informed on the
up-to-date values of homes in the areas in which they are

Mortgage Rate Update: Rates at 6 Month Low

Rates fell for the second straight week to a low not seen since
late November of last year. According to mortgage company
Freddie Mac, 30 year fixed-rate mortgages averaged 6.76
percent as of May 30th (not including points). 15 year fixed-
rate mortgages averaged 6.22 percent, also the lowest rate
since November.

Although there are a number of indications that the U.S.
economy is gaining strength, there appears to be enough
questions about the durability of the recovery to maintain
a fairly narrow range in mortgage rates thus far this year,
with rates averaging between 6.75 and 7.25 percent for
30 year mortgages.

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


Looking for a Real Estate Agent? HomeGain makes the process
quick and easy. You can anonymously evaluate top-performing
local REALTORS® and compare their experience, all online.
For more information see:

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This Month's Tip: Understanding Appraisals

A component of virtually every mortgage process is
the appraisal--an estimate of the value of the home
you are purchasing. In most types of mortgages,
some sort of an appraisal is required--you simply
cannot secure a loan without it.

What An Appraisal Entails

An appraisal is, simply, an "opinion of value" by a
professional appraiser who visits the home and inspects
the size, condition, quality and function of the home.
The appraiser will generate a detailed report and will
generally use comparisons to the sale prices of similar
homes in the area to determine a value of the home that
is being appraised--known as the "subject property."
Comparisons can be made to square footage, appearance,
amenities and overall condition.

An individual home's value can be adjusted up or down
in relation to what properties are actually selling for
in the neighborhood. For example, a home with 4 bedrooms
will generally carry a higher value than a home--in the
same area and in roughly the same condition--with only
3 bedrooms. A home that needs exterior painting will
carry a lower value than a similar home that has been
recently painted.

Why An Appraisal?

A professional appraisal protects both the lender--so
they don't lend too more than a property is worth--as
well as they buyer--so they don't PAY too much. If a buyer
gets into the heat of the moment and offers a silly (too
high) price on a home, the appraisal will often flush
it out.

Who Does the Appraisal?

The appraisal will be done by a professional appraiser--
in virtually all cases one selected by the lender.
Unlike a whole-house inspection, where the buyer should
accompany the inspector, buyers rarely are present
when an appraisal is done. In most cases, the buyer
does not even know the appraisal has been done until
after it is completed and is in the lender's hands.

Who Pays? How Much?

In the vast majority of loan situations, the buyer pays
for the appraisal, generally at the time of the original
mortgage application. The appraisal fee usually runs
somewhere between $300 and $500. This appraisal
fee is in addition to the credit check fee ($40-60) which
is also collected at the time of application.

What if the Appraisal is Too Low?

If the appraisal is lower than the maximum amount
the lender is willing to finance, then the loan cannot
proceed unless either the seller lowers the price
or the buyer increases the amount of their cash
downpayment, meaning a re-opening of negotiations
for the home purchase. Although an appraisal
is not locked in stone (miscalculations may have been
made, for example) and there may be some "wiggle-room"
in the appraisal numbers, if the appraisal comes in
considerably below what you have offered to pay,
your first inclination should be that you are paying
too much.

How Do an Appraisal and Inspection Differ?

A whole-house inspection is concerned only with the
condition of the home. In an appraisal, condition is only
part of a larger picture--including size, neighborhood and
general location. Although an appraisal will address the
condition of the home (for example, if it needs a new
heating system or roof) it should NOT be relied upon as
a final determination of the quality of the property. A
whole-house inspection is a buyer's best protection
against potential defects in the home they want to

Summing Up

Although an appraisal is another cost that must be absorbed
by the buyer, it can be money well spent. An investment of
a few hundred dollars may prevent a buyer from paying more
than what a property is worth. For this reason, we have some
reservations with mortgage programs which have recently
introduced options for either foregoing a traditional appraisal
or obtaining only a "watered-down" (for example, driving by
the home only) one--especially since the buyer usually has
to pay a fee for this service. The $300 to $500 fee for a full
appraisal could prevent paying thousands of dollars too much
for a home.

The Home Buyer's 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
Home Buyers 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:
Email Us
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 month and good luck in your home buying process!

The Team at the Home Buyer's Information Center

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