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May, 2000 Newsletter

+++++++++++ May 12, 2000 +++++++++++++++++++

Mortgage Rate Update: Bumpy Road Ahead?
Recent Site Updates: Buying a House When You Have
Credit Problems
This Month's Tip: Dealing With Market and Rate

Welcome to the May edition of the Home Buyer's
Information Newsletter. It certainly has been
an active month, with the stock market and interest
rates doing daily gyrations. What bearing will this
have on the home buying process? It is a sign that
all is not perfect with the economy, which means that
you should be mindful of some important considerations
when buying a home. We've devoted much of this
month's issue to ways to be effective in the type of
market we are now experiencing.
Mortgage Rate Update: Bumpy Road Ahead?
After several months of only moderate rate fluctuation,
late April and early May have seen the trend in
mortgage rates heading only one way: up. 30 year
fixed rates in the U.S. were in the 8.25% range, up
about .25% from only a few weeks earlier. Rates may
or may not continue their strong march upward, but
virtually no one is predicting an easing in rates.
Many experts forecast the trend toward higher rates to
continue for much of the current year. If you have
been holding off buying a home, waiting for the rate
situation to improve, your window of opportunity may
be quite limited.

For more information on mortgages, visit the recently
expanded section at:
Recent Site Updates: Buying a House When You Have
Credit Problems
Many buyers find themselves needing or wanting to own
a home but hampered by their credit history. We've
added some hints and tips on dealing with past and
current problems at:

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


LendingTree Mortgages
LendingTree Mortgage In this volatile financial and interest rate
environment getting as many loan comparisons as
possible is crucial. At LendingTree you can submit
one simple loan request form and within a few business days
get up to 4 bona-fide offers from lenders competing for your business.
Get more information here.

This Month's Tip: Dealing With Market and Interest Rate

We've received a number of emails in the last month or so
questioning how the recent fluctuations in the stock
market, the housing market and interest rates will affect
home buying and ownership. Our response is simple: If
you are careful, there should be little or no effect. If
you are careless, there may well be a nasty price to pay.
We consider careful buyers as those who honestly assess
their needs and wants, get a firm grip on their financial
situation and buy a home that fits within their means. We
would consider careless buyers as those who:

* Buy much more house than they need
* Stretch qualifying ratios to the limit
* "Cut back" to buy more house
* Use a house to massage their ego
* Empty savings to buy a house

The economic boom that we have enjoyed for the last few
years has given a false sense of security to many
prospective home buyers. As long as the economy
remains strong, there may be no problem at all for those
who are overextended. If the economy stagnates, it will
simply be difficult to "get ahead." An economic downturn,
though, could have a very painful effect on the financial
footing of those who of those who have placed all of their
eggs in the "now" basket and saved none for the future.
Here are some tips on what to avoid to prevent overextending
your home purchase (and your finances):

Buying More House Than You Need
We're not speaking here of growing families who purchase
a home with an extra bedroom in anticipation of an
increase in family size. We are talking about couples with
a single child rattling around in a 6 bedroom, 5 bath home
with half of the rooms unfurnished because housing costs are
devouring their paychecks. Not only can this be wasteful now,
it can be a liability in the future. As the core of our
population ages, there will be less and less demand for big,
extensive homes, which may negatively impact resale value
in the future. Careful buyers objectively assess their
housing needs vs. their wants. You can find more information
on this subject at:

Stretching Qualifying Ratios to the Limit
Not too long ago, mortgage qualifying ratios were generally in
the 28-36% of gross income range (housing costs no more than
28% of income and total debt no more than 36% of income). Why
those numbers? Because historically, ratios in that range were
likely to result in homeowners who would have sufficient income
to maintain their monthly mortgage payments as well as their
other debt. In recent years, though, the quest to put more
mortgage loans on the books (and buyers clamoring to put them
there) have forced those ratios to become more and more
relaxed. The upside of this is that buyers have been able to
"afford" more house than before. The downside of this situation,
though, is that the higher percentage your housing costs take
of your income, the better the chances that you will have
problems. With little or no buffer, even a small change in
income can wreak havoc with your budget.

"Cutting Back" to Buy More House
Buying a home often means making some sacrifices (downpayments
and mortgage payments have a tendency to do that!). There
should be a limit, though, to how much you are willing to
give up to buy the home you think you want. This is especially
true when buying more house than you really need, mentioned
above. Many homebuyers find it better to be financially
(and socially) comfortable, doing the things they like in a
lifestyle they enjoy, than to be forced to eliminate things
they love (vacations, hobbies, dining out and the like)
because of a crushing house payment. Developing a budget can
help you avoid tightening of the cash noose. See hints on
developing (and maintaining) a budget at:

Using a House to Massage Your Ego
One of the proudest moments in life occurs when friends
and family first visit your newly purchased home. That
pride can dissipate quickly, however, when the mortgage
payment book arrives with a monthly amount that is at the
far limits of your means. Many buyers have found that it
is better to have a moderate home in which they can continue
to have pride as they improve it than an extravagant one that
ties their finances in knots. You'll find some helpful tips on
getting your financial house in order at:

Emptying Savings to Buy a House
There's no question about it--buying a home can be hazardous
to your savings account! Inspections, downpayments, closing
costs, appraisals and moving costs can all have a detrimental
effect on your savings. In some cases (especially with many
first time buyers) this is almost unavoidable. It is best,
though, to try to preserve as much capital as you possibly
can, if for no other reason than to have funds available for
those items that you often need to buy after moving (draperies,
furniture, lawn tools and the like). Much of the anxiety
that can occur when buying a home is due to the large up-front
expenditure. Try to keep the cash drain as minimal as

In summary, by keeping a grip on your emotions when buying
a home, you are much more likely to be able to keep a grip
on your finances in the future, no matter what happens to the
economic picture.

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:
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!

The Team at the Home Buyer's Information Center

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