Home homebuyer december07

homebuyer december07

December, 2007 Newsletter

+++++++++++ December 1, 2007 +++++++++++++++++++

Introduction: Month-to-Month Sales Increase
Mortgage Rate Update: Rates Drop
This Month’s Tip: Understanding Closing/Settlement Costs

Introduction: Month-to-Month Sales Increase

Welcome to the December edition of the
Home Buyer’s Newsletter

Single-family existing-home sales were stable in October
while the condo sector was down, according to the National
Association of Realtors®. Lingering effects of the credit
crunch were a drag on sales but the mortgage situation has
improved significantly.Total existing-home sales – including
single-family, townhomes, condominiums and co-ops – eased
by 1.2 percent to a seasonally adjusted annual rate of
4.97 million units in October from a downwardly revised
level of 5.03 million in September, and are 20.7 percent
below the 6.27 million-unit pace in September 2006.

Lawrence Yun, NAR chief economist, expected the sluggish
performance. “As noted last month, temporary mortgage
problems were peaking back in August when many of the
sales closed in October were being negotiated. We
continue to see the biggest impact in high-cost
markets that rely on jumbo loans,” he said. “Mortgage
availability has improved as evidenced by much lower
mortgage interest rates and a sharp jump in FHA
endorsements for home purchases.

In new home activity, sales of new one-family houses
in October 2007 were at a seasonally adjusted annual
rate of 728,000, according to estimates released
jointly on November 29th by the U.S. Census Bureau
and the Department of Housing and Urban Development.
This is 1.7 percent (±11.0%) above the revised September
rate of 716,000 and is 23.5 percent (±10.3%) below the
October 2006 estimate of 952,000.

The median sales price of new houses sold in October 2007
was $217,800; the average sales price was $305,800. The
seasonally adjusted estimate of new houses for sale at
the end of October was 516,000. This represents a supply of
8.5 months at the current sales rate. 

Mortgage Rate Update: Rates Drop

Mortgage rates showed a fairly healthy decline during the
month of November. According to mortgage company Freddie
Mac, 30-year fixed-rate mortgages averaged 6.10% in the
period ending November 29th after beginning the month at
an average of 6.26%. 15-year fixed-rate loans showed a
similar decline, beginning November at an average of 5.91%
and ending the period at an average of 5.79%.

This is a fairly significant drop in rates from the mid-
summer of this year, when 30-year rates were averaging
in the 6.75% range.

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: Understanding Closing/Settlement Costs

OFor many homebuyers, as they are looking at and
considering homes and evaluating their budgets,
closing costs are often considered only as an
after-thought (or worse, not considered at all).
Since closing costs can add up to as much (or more)
than the downpayment, these costs will need to be an
important consideration as you determine what your
total cash outlay is going to be at settlement time.

What Are Closing Costs?

Closing (or settlement) costs are those charges and fees
associated with buying a home that are in addition to
the downpayment. They include such items as points,
deed transfer fees, professional fees, homeowners
insurance costs, taxes, etc. Although there are
occasions where some closing costs can be rolled into
the loan amount (and the monthly mortgage payment)
the majority must be paid–in cash–at the closing or
settlement. In determining the amount of closing costs
to expect, there are a number of variables involved
including the type of mortgage loan, how many points
are with the loan, state laws, and what is customary
for the buyer to pay in your area to consider. As a
very rough rule of thumb, you can figure that closing
costs will amount to 3-6% of the selling price of the

Common Closing Costs

The following are some examples of common costs that
are associated with closing (and where the money
goes!) Remember, these can vary a good bit by the
factors mentioned above–type of loan, where the
property is located and what is customary for the
buyer to pay for in your area.

POINTS Each point, which is a form of up-front
interest, is equal to 1% of the loan amount. For
example, a $100,000 loan with 2 points would mean
$2000 would be needed at closing. These may include
origination fee points as well as discount points.
PAID TO: Lender

PAID TO: Lender

PAID TO: Lender

PAID TO: Lender
(Usually paid at time of application)

PAID TO: Lender
(Usually paid at time of application)

PAID TO: Surveyor

PAID TO: Closing Agent

PAID TO: Lender

PAID TO: Insurance Company
(Usually 1 year pre-paid)

PAID TO: Local government

INTEREST until 1st day of the month
PAID TO: Lender

PAID TO: Local government

PAID TO: Local government

PAID TO: Title Insurance Company

There could be more–or less–closing costs for
which you may be responsible.

Good Faith Estimate

Shortly after you apply for a mortgage, your lender
will supply you with a “Good Faith Estimate” of your
closing costs. This is an approximation of all the
costs that will be associated with your closing.
The key word here is “estimate” since your actual
closing costs may vary a bit–either higher or lower–
from what is quoted. A good faith estimate is a
reasonably close guide to the cash you will need, but
it is not a guaranteed document. The actual amount
will be disclosed on your final settlement statement,
available a few days prior to closing.

Can (and Will) a Seller Pay Your Closing Costs?

A seller is not required to pay ANY of a buyer’s
closing costs. Although there may be certain types
of mortgages that will make some of the buyer’s
closing cost the responsibility of the seller (for
example, 1 point) the seller is not obliged to accept
such an offer. They can wait for another buyer who
does not need closing costs paid.

Whether or not a seller will help with closing costs
is determined, to a large degree, by the strength or
weakness of the Real Estate market in the area. If
you are interested in a correctly priced home in an
active market, it is less likely that a seller will
pay any closing costs as opposed to a slower market
where potential buyers are more scarce (making the
home more difficult to sell).

Keeping Closing Costs at a Minimum

Most closing costs, by their nature, are locked in
stone. For example, if all property transfers in your
area are subject to a transfer tax payable by the new
owner of the property, you will need to pay the tax.
Homeowners Insurance is required on all properties in
which a mortgage is involved. The closing Agent or
Attorney will charge a fee for their services.

If you are low in cash, you may want to consider some
of the following hints for reducing your overall
expendure at closing time.

1) Interest rates and points directly affect each
other. The less points with a loan, the higher the
interest rate and the more points, the lower the
interest rate. So, it may make sense to take a
higher rate (with less points) if you want to reduce
the amount needed at closing.

2) When comparing lenders, be sure to compare their
fees as well as interest rates and points. These
fees can add up at closing time.

3) Since homeowners insurance is paid up front
(generally for at least 1 year) shopping for the
best deal can save money.

4) Closing Agent and Attorney fees can vary, so you
will want to make comparisons of their charges.

In Summary

Although you don’t have an option of whether or not to
pay closing costs (for certain, at least some WILL be
on your closing statement!) you can, with some
preparation, minimize the impact.

Resources on the site:
Good Faith Estimate:
Making Mortgage Choices
Closing and Settlement
Saving on Homeowners Insurance

Next Month’s Topic: Lessons Learned

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.

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.

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