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September, 2001 Newsletter


+++++++++++ September 1, 2001 +++++++++++++++++++

CONTENTS:
Introduction: New Construction Up, Resales Down
Mortgage Rate Update: Rates Remain Below 7%
Recent Site Updates: Title Insurance
This Month's Tip: Mortgage Qualifying
++++++++++++++++++++++++++++++++++++++++++++
Introduction

Welcome to the September edition of the Home Buyer's
Information Newsletter. July held some surprises for
the home sales market, as new home sales were up
4.9% (above analysts expectations) but existing home
sales fell 3% (a larger drop than expected). Pricing
continues to have a wide variance with certain areas
showing strong price increases, other areas in a
"holding pattern" and still others with a price
decrease, especially in higher-end properties.

+++++++++++++++++++++++++++++++++++++++++++++
Mortgage Rate Update: Rates Remain Below 7%
30 year fixed-rated mortgages stayed at or below
7% for the fourth straight week. Mortgage company
Freddie Mac reported that the average for 30 year
fixed loans was 6.92% (with about 1 point) for the
week ending August 30th.
For more information on mortgages, visit the Mortgage
Section at:
Mortgage Information

++++++++++++++++++++++++++++++++++++++++++++++
Recent Site Updates: Title Insurance
Virtually all home purchases will have some sort of
title insurance involved, yet many buyers are not at
all sure what it covers. We have a new article on
the site that details all you need to know:
Title Insurance
+++++++++++++++++++++++++++++++++++++++++++++++

Sponsor: LendingTree

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 Months Tip: Mortgage Qualifying

An often confusing (and sometimes frustrating) aspect of
obtaining a mortgage involves the qualifying process.
What is qualifying? How do I qualify? What are
qualifying ratios? What are the parameters?

Simply put, qualifying is the initial determination
whether or not you will be able to afford a particular
mortgage and the home price to which the mortgage would be
attached. This will take into account your income,
your current debts and the amount of the proposed mortgage
payment. Qualification (along with a credit report) is
one of the first steps on the road to mortgage approval.

Although your eventual lender will do the qualification for
you, it is usually a good idea to begin the process yourself,
in order to focus your attention on properties (and loan
amounts) that will be within your range. You can do your
basic calculations with nothing more than a pen, paper
and a calculator. You will need to figure 2 ratios:

1) Your "top" ratio, which is the percentage of your housing
expense (mortgage, taxes, insurance and homeowners
association fees) to your total income and

2) Your "bottom" ratio, which is the percentage of your
total debts (credit card payments, car and personal loan
payments as well as any other monthly debt payments PLUS the
cost of the housing expense above) in relation to your
total income. You'll find the procedure for this
computation on the site at:
Qualifying Ratios

Acceptable ratios will vary somewhat by type of mortgage,
buy you'll probably want to make your first goal the
28% (housing expense) and 36% (total debt expense) ratios
used by most conventional mortgages.

For your income, use your gross (before tax) monthly
income. For those whose incomes include bonuses or
commissions, if the bonus and commission structure
is established and long-term, you'll probably be able
to add an average monthly amount. If, however, it is
variable or short-term, your lender will need to make a
close examination of your pay history to determine
whether or not all or part of the bonus or commission
can be added to your base income.

Some mortgage programs (notably FHA and VA) are somewhat
more liberal than the 28% and 36% ratios quoted above.
In addition, ratios may be increased a bit for those
who have more downpayment (10-20%+). This can be a
real boost to a couple types of buyers--those who are
buying their first home and are confident that their
earnings will grow and those who live in areas where
housing costs are extremely high. In these cases, a
little higher ratio may be the difference between being
able to buy a home or not.

For most buyers, though, staying under those 28% and
36% ratios can carry many benefits: Less anxiety at
mortgage payment time and more money left over for
reserves, savings and the life that exists beyond
the 4 walls of the home, just to name some important
ones.

We've seen a number of home buyers push their qualifying
ratios to the absolute limit only to find themselves
unable to take a vacation, find that they must defer
necessary maintenance to their homes or be forced to
extend expensive credit card debt. There simply was
not enough money at the end of the month to do the
things that they wanted--or needed--to do. Just because
a lender says "you can afford" an expensive monthly
mortgage payment does not mean that you really can
(or would want to!)

This is especially true in economic periods that have
some uncertainty. Not only can income be affected, the
old adage of "buy the most house you can possible afford"
can work against you. Home prices MAY continue to rise
at the breakneck pace of the last few years, but it appears
at least an even bet that they will slow or even
stagnate at some time in the future. Buying too much home
may backfire, causing problems down the road. As we've
frequently said, it usually makes more sense to take a
few moderate steps rather than one huge one.

Next month's topic: The Importance of Inspections

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),
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 month of September and good luck in your home buying process!

The Team at the Home Buyer's Information Center

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