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October, 2008 Newsletter

+++++++++++ October 1, 2008 +++++++++++++++++++

Introduction: Lots of News
Mortgage Rate Update: Rates Make Big Moves
This Month's Tip: Preparation Times 3

Introduction: Lots of News

Welcome to the October edition of the Homebuyer's
Newsletter. On the Real Estate front, there has been a lot
of news since our last installment. Most important, for both
the short-term and the long-term, is the bailout situation in
the United States. Many analysts are weighing in on the potential
impact and there is no real consensus on the effects. In addition,
rates that fell during the month of September will also have an
impact on the market. See the mortgage rate update below for the
latest figures.

In news prior to the bailout, existing-home sales were down in August
following a healthy gain in July as tight mortgage credit curtailed
activity, according to the National Association of Realtors®. Sales
rose in the Midwest and South but fell in the Northeast and West.

Nationally, existing-home sales – including single-family, townhomes,
condominiums and co-ops –declined 2.2 percent to a seasonally adjusted
annual rate1 of 4.91 million units in August from an upwardly revised
pace of 5.02 million in July, but are 10.7 percent below the 5.50
million-unit pace in August 2007.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate
Specialists in Long Beach, Calif., said the pendulum in the mortgage
market has swung too far. “The difficulty in obtaining a mortgage
increased over past couple months, making it more challenging for
creditworthy borrowers to find financing,” he said. “Our hope is
that overly tight lending criteria can be loosened with reasonable
standards and credit so that sales activity can catch up with demand.
Interest rates have already declined, but there is a serious question
as to whether a cash infusion by the U.S. Treasury into Wall Street
would help consumers by improving mortgage funding.

On the new home sales side, Sales of new one-family houses in August
2008 were at a seasonally adjusted annual rate of 460,000, according to
estimates released jointly on September 25th by the U.S. Census Bureau
and the Department of Housing and Urban Development.

This is 11.5 percent (±11.7%) below the revised July rate of 520,000
and is 34.5 percent (±7.3%) below the August 2007 estimate of 702,000.
The median sales price of new houses sold in August 2008 was $221,900;
the average sales price was $263,900. The seasonally adjusted estimate
of new houses for sale at the end of August was 408,000. This represents
a supply of 10.9 months at the current sales rate.

All in all, it is definitely a time for a potential home buyer to
keep a clear eye on the trends!


Mortgage Rate Update: Rates Make Big Moves

Mortgage rates made big moves in the month of September, with 30-year
fixed-rate mortgages going from an average of 6.40% at the beginning of
the month, dropping all the way down to 5.78% shortly after the bailout
news and then rising to 6.09% in the period that ended last week. 15-year
fixed-rate mortgages showed the same kinds of gyrations during the month.

Going forward, odds are better than even that the government takeover
of Freddie Mac and Fannie Mae will affect mortgage rates, likely to
the side of reduction. How much and how long the effect will be can
not be determined for at least a couple of months but it definitely
something to keep an eye on.
For current average mortgage rates, see the
rates page.

For more information on mortgages, visit the
Mortgage Section

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This Month's Tip: Preparation Times 3

If there is any activity that you do not want to embark upon without
preparation, it would be the purchase of a home. The expense and the time that
is involved in buying (and later, in selling) means that you want to have as
much preparation as possible in place before you finalize your purchase. Undoing
mistakes can be costly, or, in some cases, not reversable. The amount of time
that you spend on the preparation phase can bring huge rewards down the line.

In reality, the preparation process is truly not as complicated as many fear.
There are just 3 main areas where you will need to concentrate your preparation.
They are, in order of time-line:

1) Budget preparation
2) Mortgage preparation
3) Property preparation

Budget preparation

To some degree, everything flows from the preparation you do here. If your budget
is not established and in order, it makes no sense to proceed to the mortgage phase and
even less sense to go to the property preparation phase. Unfortunately, many buyers
proceed in precisely the reverse direction--they find a home that they like, then
try to find a mortgage and if they enounter problems they struggle to get their
budget in line. Often it is too late and they cannot get the very house that they

To preven going too far down the road with a house that will not meet your financial
means or a mortgage that doesn't fit your financial picture, it is important to spend
some time analyzing both your current budget situation as well as how that budget will
be impacted by the purchase of a home. By getting a firm hold on your budget picture
you will be much better prepared to determine both the scope and the type of mortgage
that will fit.

You can find a discussion of budgets, including sections on saving money on everyday
purchases as well as a budget chart on the website here:
Household budgets

Mortgage preparation

Unlike a couple of years ago, you will in all likelihood need to spend some time
getting familiar with the entire mortgage process. The days of mortgage companies
shooting from the hip and granting loans to almost anyone who could pass the mirror
test--if you can fog a mirror, you are approved--are obviously over. In virtually
all cases this means that you will need to qualify for a loan. Your income will need
to be in a range that meets the loan's requirements. Your debt load will need to fit
the standards of the lender and loan type. Your credit will not need to be perfect,
but those with considerable credit problems will have many more challenges involved
in securing a loan.

You can find a wealth of information on the Home Buyer's Information Center site
dealing with all aspects of the mortgage process here:

Property preparation

Property preparation does not mean that you will need to go out and physically prepare
the property, of course (you will have plenty of time to do that later!) It does mean,
however, that you will need to spend some time determining if the property that you
are considering is right for your wants and needs and in the kind of condition that
will not bring surprises later. First off, it is important to determine whether the
pricing is in the right range for the current market. There are still an enormous
number of sellers who are in real denial about the direction that real estate values
have taken in the last few years. Many of these sellers have their homes listed 10%,
20% or more out of the money. An appraisal MAY knock these prices down to reality
but if you purchase a house (and get it financed) for more than it is worth, and you
are starting out badly behind the eight ball. Mistakes such as these can take
years of a recovering market to rectify.

Once you have settled on an area (or a specific property) that fits, make sure that
your Agent runs a CMA (Comparative/Comparable Market Analysis) with RECENT sales
prices, before you make any type of final commitment. You will want to see what homes
are actually selling and closing for to get a clear picture of current values. You
can get more information on pricing here:
Home Values

You will also want to make sure that there are no surprises in the condition of the
property. The best way of doing this is to spend the minimal amount of money that is
required to get a whole house inspection. A professional home inspector can be worth
their weight in gold if they ferret out current problems or issues that may become
problems in the future. See the discussion on this subject on the site here;
Home Inspections

Next Month's Tip: Changes in the Mortgage Market:

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

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

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 all your endeavors!

The Team at the Home Buyer's Information Center

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