by: Charlie Essmeier
A new study by National City Corp. looked at home values for 299 American cities and compared them to where they ?should be? based on a number of economic factors that determine home prices. The results were not encouraging; homes in nearly one third of America were judged to be ?extremely overvalued.? That?s the part that?s getting headlines. A complete read of the report shows that things are even worse, as 100 cities in the U.S. have values judged to be too high by 18% or more. What does this mean?
It will come as no surprise to most people that the areas judged to be the most overvalued are in California, Florida, and New York and Massachusetts. Home prices in these states have increased at a rate that far exceeds the increases in salaries in these areas. When homes are priced in a way that is disproportionate to income, they become unaffordable. The mortgage industry has come up with a number of clever solutions to this problem by introducing an ever-increasing number of creative loan products. Interest only mortgages, where buyers only pay interest on the loan, rather than principal, for the first five years of the loan, and Option ARM mortgages, with ?teaser? interest rates that can run as low as one percent, have allowed people to purchase homes they otherwise would not be able to afford. Neither one of these dangerous loan types contributes any money to the actual purchase price of the home, leaving their buyers in a precarious position should prices fail to keep rising. The nationwide increase in foreclosure rates suggests that the market is probably peaking.
What does this mean for the average buyer? Home prices in the top 100 markets in the U.S. are overpriced by anywhere between 20% and 70%. Prospective buyers should realize that any home they purchase now will probably not appreciate much more in the near future, and they should finance their purchases with this in mind. Buyers should make certain that they can actually afford the purchase price and that they can afford a mortgage that will reduce the principal of the loan over thirty years. A home purchase with any other terms would have to be considered a risk, since prices are more likely to fall or stay the same in the future than they are to rise. Use some common sense when making a purchase, and all will be well.
About The Author
©Copyright 2005 by Retro Marketing.
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Fixed Rate or Adjustable?
Fixed Rate or Adjustable?
by: Gary Gresham
Fixed rate or adjustable rate mortgages are two choices of mortgage loans that most lenders will offer you.
Your financial situation, how long you plan to live in the home, the current interest rates, and what risks you are willing to take is the best way to decide which loan makes the most sense for you.
Understanding the benefits as well as the risks of each loan will help when deciding if a fixed rate or adjustable rate loan works best for you.
Fixed Rate Home Loan
A fixed rate home loan offers you monthly principal and interest mortgage payments that never change for the life of your loan.
A Fixed rate home loan is the most stable option
with very little risk.
That is why it is the most popular way to finance a home today.
Fixed rate home loans are available as 30, 20, 15 and 10 year loans and they make sense if you answer yes to the following...
Fixed Rate or Adjustable?
Mortgages > Fixed Rate or Adjustable?
Private Mortgage Insurance Doesn't Protect Homeowners
Private Mortgage Insurance Doesn't Protect Homeowners
by: George Burks
If you borrowed more than 80% of the appraised value of you home, you're probably paying private mortgage insurance (PMI). PMI that is not lender paid is a waste of money. If you default on your mortgage, the private mortgage insurance provider will pay the lender, but you still would lose your home. PMI do not offer you any benefits whatsoever. PMI payments aren't even tax-deductible.
PMI increases your effective mortgage interest rate. On a $100,000 loan with 10 percent down ($10,000), PMI would cost you $43 a month. If you can cancel the PMI, you can save $516 a year and many thousands of dollars over the course of the loan. If your down payment was less, the cost of your PMI will be greater. If your down payment was 5%, ($5,000), your PMI expense would cost you $780 a year or $65 a month. Check your annual escrow account statement or call your lender to find out exactly...
Private Mortgage Insurance Doesn't Protect Homeowners
Mortgages > Private Mortgage Insurance Doesn't Protect Homeowners
ARM ? Adjustable Rate Mortgages
ARM ? Adjustable Rate Mortgages
by: Dan Lewis
Traditionally, homebuyers could look to two forms of mortgages ? fixed rate and adjustable mortgages. While there are now many more options, this article takes a look at the adjustable rate mortgage.
What is an ARM Loan?
An adjustable rate mortgage [?ARM?] is a basic mortgage with one important exception. With an ARM, your interest rate will start low but typically move up throughout the link of the loan. The timing of the movements is dictated by the terms of the loan. The rate may be adjusted every month, but more typical periods are every six or twelve months. Most adjustable rate mortgages also have a cap on the amount the interest rate can be raised in a particular period.
?ARM? Yourself?
A homebuyer has to be very careful when selecting an adjustable rate mortgage. Buying a home necessarily involves budgeting out how much of a monthly mortgage rate you can afford to pay. With...
ARM ? Adjustable Rate Mortgages
Mortgages > ARM ? Adjustable Rate Mortgages
How Debt Consolidation Mortgages Work
How Debt Consolidation Mortgages Work
by: Talbert Williams
When families and individuals have credit issues, it frequently
becomes easier said than done to survive, let alone get a loan to
save your home. Credit troubles can create a disordered future
and this can sometimes lead people to give up hope. Today,
lenders specialize in helping families and individuals find
sources to consolidate their debts and save their home.
The lenders will evaluate the three credit reports, and if the
reports show defaults, they may be reluctant to provide a loan.
However, if the reports show effort to clear up the debts, the
lender may bear in mind that you had uphill challenge, but you
are still making effort to take care of your debts. The
disadvantage of debt consolidation lending is that many lenders
will frequently present loans with high interest rates and
mortgage repayments.
If you are looking to consolidate...
How Debt Consolidation Mortgages Work
Mortgages > How Debt Consolidation Mortgages Work