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June, 2003 Newsletter


+++++++++++ May 31, 2003 +++++++++++++++++++

CONTENTS:
Introduction: Both Existing and New Home Sales Increase
Mortgage Rate Update: Rates Continue to Decline
This Month's Tip: How to Build Equity
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Introduction: Welcome to the June edition of the
Home Buyer's Newsletter. On the market front, sales of both
existing and new home sales increased in the month of April.
Sales of existing single-family homes rose last month and
are at the fifth highest level of activity ever recorded, according
to the National Association of Realtors®.

Existing-home sales rose 5.6 percent in April to a seasonally
adjusted annual rate* of 5.84 million units from a level of 5.53
million units in March. Last month's sales activity was 3.2
percent above the 5.66-million unit pace in April 2002.

David Lereah, NAR's chief economist, said the indicators were
up. "Consumer confidence rose following the swift action in Iraq,
mortgage interest rates have been at record lows and new-home
sales rose sharply in March," he said. "The favorable conditions in
April caused existing-home sales to rise to their fifth-best showing
ever a pace that will be difficult to sustain but demonstrates that
the housing sector will be close to a record this year."

On the new home front, sales of new one-family houses in April
were at a seasonally adjusted annual rate of 1,028,000,
according to estimates released jointly on May 27th by the U.S.
Census Bureau and the U.S. Department of Housing and Urban
Development. This is 1.7 percent (±8.6%) above the revised March
rate of 1,011,000 and is 12.2 percent (±11.0%) above the April 2002
estimate of 916,000.

The median sales price of new houses sold in April 2003 was
$185,100; the average sales price was $235,000. The seasonally
adjusted estimate of new houses for sale at the end of April was
338,000. This represents a supply of 3.9 months at the current sales rate.

+++++++++++++++++++++++++++++++++++++++++++++
Mortgage Rate Update: Rates Continue to Decline

In a trend that continues to amaze many financial analysts,
mortgage rates continued their decline in the month of May.
As of May 29th, according to mortgage company Freddie Mac,
30-year fixed-rate mortgages averaged 5.31%, down from 5.79%
at the beginning of the month and down an incredible 1.45% from
the already historically low 6.76% average one year earlier. 15-year
fixed-rate mortgages averaged 4.73%. Both the 30-year and the
15-year average rates do not include points.

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

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This Month's Tip: How to Build Equity

One of the primary goals of home ownership should be
the building of equity in the home. Equity is simply
the difference between the current value of a property
and the balance of all mortgage obligations. For
example, if you have a home that is valued at $175,000
(based on an appraisal or a Comparative Market Analysis
--a CMA, not on an "I wish" number) and a mortgage
balance of $147,000, you have $28,000 in equity ($175,000
minus $147,000 = $28,000). That $28,000, as long as the
market remains stable, is like money in the bank. As
values increase and mortgage payments reduce the level
of debt, equity--that "money in the bank"--grows also.

We've seen a strange phenomenon in the last few years
when it comes to the level of home equity that people
have in their homes. Home prices have appreciated at
an almost unprecedented level, meaning individual homes
are worth more (and some are worth a great deal more).
Mortgage interest rates, on the other hand, are at
historic lows, meaning that less of each monthly payment
is going to interest and more is going to principal,
lowering balances quicker. More value and less balance
equates to more equity in the average home, right?
Actually, the exact opposite is true. While values of
homes are growing at exceptional rates, so too are
loans taken against that value. The home equity
loan (and credit line) business is booming. More and
more people are using the equity in their homes to
finance home improvements, purchases, even pay off
outstanding credit card debt. Thus, home equity
levels are at one of the lowest levels in history.
Instead of having more money in that "bank account"
we have less. Instead of building wealth, we are
eroding it.

Why Equity in a Home is Important

Simply stated, the appreciation of equity in a home
is one of the easiest and most successful paths to
wealth that is available to you. To a large degree,
it is almost painless--you make the mortgage payment
that you would have to make anyhow and the balance
is reduced. The value of the home, meanwhile, is
rising. Every month, then, your nest-egg should be
growing. The quicker you find yourself at 100%
equity--owning nothing on your home--the quicker the
route to a comfortable (or early) retirement, to less
financial stress, to true (as opposed to fake) wealth.

How to Build Additional Equity

There are a number of ways to build additional equity
in a home, some easier than others but all effective.

1) Higher initial downpayment
2) Extra principal payments
3) Shorter mortgage term
4) Lower interest rate
5) Home improvements

Higher initial downpayment

The most obvious way to build additional equity is
at the first opportunity--making a larger downpayment
at the time of purchase. This extra money is immediately
"banked" in the home, making it much less tempting to
spend.

Extra principal payments

Making extra payments of principal (or just adding
money to your monthly payment designated to go to
principal) has a double effect on your equity. First,
every dollar you send reduces your debt by the same amount.
Second, reduced debt means less interest paid, which means
that each month more of your payment goes to principal
and less goes to interest. NOTE: Although most loans
allow it, be certain that your lender will accept extra
payments of principal.

Shorter mortgage term

The lower mortgage interest rates that we have seen
recently means that for many buyers, they are able
to either initially secure a mortgage with a shorter
term or, if the are currently in a long term mortgage
(such as 30 years) refinance and get a shorter term.
These shorter mortgage terms mean that you will be
paying down your principal much quicker and therefore
gaining additional equity at a much faster rate.

Home improvements

When you improve the quality or size of your home,
you also increase its value and thus your equity.
Be aware, though, that although virtually all
home improvement projects will bring some return,
some are much more advantageous than others. For
example, remodeling kitchens or bathrooms traditionally
have brought a greater return than adding leisure
amenities such as pools or whirlpools. To get the
maximum equity enhancement, make certain that the
kind of improvements you are looking to do will
raise the value appreciably.


Summing Up

Building additional equity in your home can be
relatively simple yet extremely rewarding.
Not only can it bring a real sense of achievement,
equity in your home brings a wealth of options,
most notably the fact that you are building a nest
egg with a minimum of effort. Explore the options
to find the equity building plan that best suits
your needs and timetable.

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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:
Email Us
or access our feedback page at:
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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