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March, 2001 Newsletter


+++++++++++ March 9, 2001 +++++++++++++++++++

CONTENTS: Introduction
Mortgage Rate Update: Up and Then Down Again
Recent Site Updates: Buying a House with Nothing Down
This Month's Tip: Buy Less, Get More

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Introduction
Welcome to the March edition of the Home Buyer's Information Newsletter. Even though there has been a good bit of concern about the U.S. economy in the last few months, home sales remain relatively strong. Although both new and pre-owned home sales have had months of up-and-down activity, the overall housing market has shown little signs of sustained weakness.

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Mortgage Rate Update: After spending a couple of weeks over 7.00%, 30-year rates have again declined. Freddie Mac's nationwide survey of mortgage lenders found an average 30-year fixed rate of 6.98%. 15-year fixed rates averaged 6.52%, making this option more and more attractive for many homebuyers. As the busy buying season arrives, this could be an excellent combination of lower rates, good housing availability and some slowdown from the meteoric price increases of 1999 and 2000. For more information on mortgages, visit the Mortgage Section at:
Mortgage Information

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Recent Site Updates: For years, there have been very few options for buyers seeking to purchase a home with little or no money down. Recent changes in the conventional mortgage market have made for a much better situation for those wanting or needing to keep their initial investment at a minimum.
See more information on the site at:
Buying a House with Nothing Down

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

You can always find out "What's New" at the Home Buyer's Information Center at the following location:
Site Updates

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This Month's Tip: Buy Less, Get More

BUY LESS

Visitors to the Home Buyer's Information Center will often ask us "if there is one homebuying tip that is the most important, what would it be?" Our response? "Don't overpay for your home." Sounds fairly basic, but in reality, there are a number of factors that are involved, all of them extremely important to your home purchase and ownership experience. When you pay too much for a home, it is a problem that stays with you in the form of higher mortgage payments and less equity when it comes time to sell. Not overpaying for a home starts at the very onset of a buyer's decision to purchase a home. One of the prime reasons that a buyer pays too much is a fairly common one-- mistaking thier wants for their needs. When you are in the excitement of buying, it is easy to lose sight of the difference between what you need--which helps to keep a cap on your expenditure--and what you want--which can quickly bust your budget.
More information on the site:
Needs and Wants

A second reason that a buyer can pay too much is by making the mistake of allocating too much of their income to housing costs. Until very recently, the time-honored standard was that your monthly housing costs--including principal, interest, homeowners insurance and property taxes--should be no more than about 28% of your total gross monthly income. Why? Because a figure in that range would allow for income taxes, utilities, education, other debts and an allocation for at least some savings. In the last couple of years, though, that 28% figure has gotten severly tested--and increased--more and more. We see 2 main reasons: Increases in the price of homes and desire by lenders to qualify (and book) more and more mortgages. It is fairly obvious, though, if you take a bigger chunk of your income for housing expenses you will need to give up something else, since you can't spend more than 100% of your income (unless you are increasing your debt).

Another way of paying too much for a home comes from lack of preparation. Unlike many other commodities (cars, clothes, computers, etc.) there are no suggested retail prices for pre-owned homes. This lack of a set price means that sellers can price their homes for whatever they want. That's how many sellers marketing their home alone--and even those with an Agent who can't resist a "too-high" price find their way to the market, waiting for an unprepared buyer. There are ways, however, to weed out and eliminate the overpriced properties or to negotiate a more reasonable price. First, be up-to-date on comparative values in the neighborhoods in which you are interested. Second, buyer's agency--where a Real Estate Agent represents the buyer's interests alone--is available almost everywhere. A Buyer's Agent can research the current values in the area and assist a buyer in developing an offer that will be to the buyer's advantage.
More information on the site:
Housing Values
Buyer Agency

GET MORE

There are numerous benefits when you make the decision to buy less and get more in a home purchase. The first bonus is that you will need less cash at the outset. Lower selling prices mean less downpayment and, since many settlement fees are based on the home price, less closing costs. Obviously, lower prices also mean lower mortgage payments, lower taxes and lower insurance costs on a monthly basis. By reducing your costs, you leave breathing room (meaning cash) for those other necessities involved with home ownership--notably maintenance and repairs but also items such as furnishings and decorating costs, landscaping, etc. There's something sad about a large beautiful home devoid of draperies, decorating and furniture because the owner could not afford them due to an oppressive mortgage payment.

Another benefit of keeping a tight rein on your housing expenditure involves maintaining (or enhancing) your lifestyle. Buyers who bury themselves with heavy mortgages (in relation to their income) often find funds for entertainment, vacations, education and other luxuries (and even necessities) severely lacking. It becomes the classic case of "house poor" where too large a percentage of income is devoted to your housing, leaving little or nothing for the your other needs. If you've made the mistake of "buying too much" the only way out may be to add to your credit card or loan debt, which only serves to compound the situation.

Additionally, if you find it hard to make ends meet because of housing costs, adding to your savings is almost never a possibility. In the United States, the trend has been to a negative savings rate--spending more than we earn--which should raise concern regarding future financial needs such as higher education and retirement as well as those "surprise" expenditures such as a new roof or heating system.

A final "buy less, get more" advantage is flexibility. The better a buyer does in BUYING enhances the options when SELLING. A reasonably priced home will always sell more quickly than an overpriced one (where a seller tries to recoup their buying mistake). In addition, if you have been able to maintain a good rate of savings, it will make the transition to a better or larger home much easier. You'll be able to have more cash available for downpayments and closing costs. 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 March and good luck in your home buying process!

The Team at the Home Buyer's Information Center


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