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October, 2003 Newsletter

+++++++++++ October 1, 2003 +++++++++++++++++++

CONTENTS:
Introduction: New and Resale Home Sales Increase
Mortgage Rate Update: Rates Trend Lower Again
This Month's Tip: The Transition from Renting to Owning

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Introduction: Welcome to the October edition of the
Home Buyer's Newsletter. Both new and resale home sales
rates increased in the month of August, as expected.
Sales of existing single-family homes set a second consecutive
monthly record in August on the heels of record-low interest rates
in June, according to the National Association of Realtors®.

Existing-home sales rose 5.5 percent in August to a seasonally
adjusted annual rate* of 6.47 million units from an upwardly
revised level of 6.13 million units in July. Last month's sales
activity was 21.8 percent above the 5.31-million unit pace in August
2002. David Lereah, NAR's chief economist, said the two-month
surge indicates the top of the housing market's historic run. "Some
of the home sales closed in August were negotiated in June when
mortgage interest rates hit record lows," he said. "Much of the
remaining portion of sales reflect quick decisions to make offers
in July when interest rates began to rise sharply. The good news
is that mortgage interest rates have declined over the last couple
weeks."

On the new home side, sales of new one-family houses in August
2003 were at a seasonally adjusted annual rate of 1,150,000,
according to estimates released jointly on September 27th by the
U.S. Census Bureau and the U.S. Department of Housing and
Urban Development. This is 3.4 percent above the revised July
rate of 1,112,000 and is 12.2 percent above the August 2002
estimate of 1,025,000.

The median sales price of new houses sold in August 2003 was
$184,500; the average sales price was $237,500. The
seasonally adjusted estimate of new houses for sale at the end
of August was 347,000. This represents a supply of 3.7
months at the current sales rate.

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Mortgage Rate Update: Rates Trend Lower Again

In a striking turnaround, mortgage rates decreased appreciably
during the month of September. According to mortgage
company Freddie Mac, rates for 30-year fixed-rate mortgages
averaged 5.98% for the period ending September 25th, down
from an average of 6.32% one month earlier. 15-year fixed-rate
loans averaged 5.30% in the most current period, a decrease
from the 5.66% seen a month earlier. These quoted rates do
not include points paid up-front to the lender.

You will need a real crystal ball to forecast the future trend of
rates. So much is dependent on how economic indicators fare
in the coming months, and there is a wide variety of opinions on
everything from unemployment rates, GDP growth and corporate
profit outlooks. Stay tuned!

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: The Transition from Renting to Owning

Although some first-time homebuyers will be making the
transition to home ownership from living at home or the
military, the vast majority will be making a move from
renting to owning. This transition can be either smooth
or rocky, depending on the understanding of and the
preparation for the change. This transition will often be
somewhat frightening, somewhat exciting and a good bit
confusing. Still, it is a journey that millions have
made before you, so there is a fairly good road map
if you are ready to follow it.

When you will have made the move from renting to owning,
one of the first transitions you will need to adjust to
is one of your mindset--where you live now belongs to YOU and
not to someone else. This can have both positive and
negative connotations. The positive is obvious--you own
your own home. It all belongs to you. The negative, for
some, is that BECAUSE you own your own home you will now
need to deal with your own needs. No more calling the
landlord when the faucet drips or the roof needs repair.
You'll now need to make your own arrangements.

The majority of transition issues will be financial. For
example, most buyers will find a marked difference in
their income tax computations. In the United States,
mortgage interest (with a few exceptions--consult a tax
advisor regarding your situation) is deductible on your
federal income tax return. This can make a considerable
difference in the amount of income tax you will be paying
(definitely a positive!).

Another important financial aspect is the equity you will
be gaining in the home. Equity is, simply, the difference
between the value of your home and the amount you owe on
the mortgage. This number should be growing every month
since the home's value will generally be increasing while
the balance owed on the mortgage will be decreasing as you
make your monthly payments. The equity in your home is
like an unseen bank account, slowly but steadily gaining
value. You can never have this advantage when you rent--
the equity growth goes to the landlord, not to the renter!

A financial aspect that surprises some first time home
owners is the expense that it often takes to maintain and
repair a home. They may not all be "money pits" but owning
a home can take a big bite out of the monthly budget. Not
only will you be responsible for ongoing minor maintenance
and repairs, it is probably a good idea to put a set amount
into savings each month designated for larger expenses
(roofs that need replaced, new furnaces, etc.) that are
certain to arrive. Many homeowners find that by putting
away $75 - $1000 per month, the expenses for these repairs
are largely covered when they are needed.

Another expense that is often unbudgeted by the new
homeowner is furniture. In most cases, you will be moving
from a smaller apartment or rental home to a larger one.
Larger houses usually mean more and larger rooms and
that usually equates to more furniture.

If you are coming from a rental to a NEW home, you
will need to be prepared less for repairs and maintenance
than if you buy a previously owned home. You will,
however, need to be aware of some expenses that can
catch you unprepared:

* New homes generally have very basic (or no) landscaping.

* New homes will need window treatments--blinds,
drapes, curtains and the like. If these are "normal" sizes
they can be expensive, but if they are custom sizes the prices
can give you a real case of sticker shock!

* New homes are usually fairly bland--white or off-white
walls and no wallpaper. Personalizing a new home can involve
added expense.

Repairs and Maintenance: Handling Things on Your Own

If you have been used to phoning the landlord when you
had a problem, you will now need to adjust to ways of
handling things on your own. You can learn to handle
many repair and maintenance items on your own, but for
more major projects you will most likely need to deal
with professionals. It is a good idea to develop a list
of who to call--by trade or profession--before you need
someone. Better to know of a good plumber BEFORE you
have a water heater blow out rather than later when you
need one immediately because there is an inch of water
on the kitchen floor. A good way to develop such a
list is to ask friends, co-workers and relatives for
the names of professionals with whom they have had good
success. The categories you will need on your list
include:

* Electrician
* Plumber
* Heating/Air Conditioning Technician
* Roofer
* Carpenter
* Painter
* General Handyman

Summing Up

Many buyers make the transition from renting to buying
with little or no preparation. For some, it may be a
smooth process, but others may be blindsided by
unexpected expenses and/or responsibilities. The
simplest way of preventing such surprises is to review all
potential responsibilities as well as taking some time to
determine your total home ownership budget. This should be done
even before you take the first steps in purchasing a home
to make certain that you make decisions that will best fit
your needs and wants.


Next Month's Topic: Choosing an Agent

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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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