Making sense of house prices
By Marcie Geffner – LendingTree.com

It’s no secret that home prices have declined in many U.S. towns and cities. Indeed, the downward trend has been the subject of numerous newspaper headlines, not to mention plenty of cocktail party small talk, water-cooler chitchat and neighborhood gossip.

Yet home prices aren’t just a subject of idle conversation.

If you want to buy a home, prices determine which homes you can afford. Or if you already own a home, your home’s value affects whether you can refinance your mortgage, take out a home equity loan or line of credit, or stop paying for mortgage insurance.

Equity is king
Your home’s value is a component of your equity, which is the difference between the value and the amount you owe, often expressed as a percentage. For example, if you borrowed $270,000 to buy a $300,000 home, your equity at the time of purchase would be $30,000, or 10 percent. If the value of your home dropped, your equity would shrink as well. The more equity you have, the easier it should be for you to qualify for a loan, refinance an existing loan or sell your home, if need be.

Unfortunately, much of the readily available information about home prices can be confusing or misleading, which makes it harder to get a true picture of home values in your area. For example, national and local median home prices are widely reported, but don’t necessarily reflect the value of an individual house.

Online information can be confusing
Many people check Web sites that estimate home values to make sense of prices. Online price estimates can be interesting; however, keep in mind that they may not be based on enough accurate data to give a true picture of how much a specific home is worth.

For those reasons, national trends and online estimates may be better used as a point of reference than relied on to make major financial decisions.

A REALTOR® can help
If you’re looking for good information about home prices in your area, ask a local REALTOR to prepare a comparative market analysis, or “CMA.” A CMA should be based on recent sales prices of homes that are similar in size, location and condition to your home or the home you want to buy.

Now that’s data you can count on.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.

New form could help mortgage shoppers
By Marcie Geffner – LendingTree.com

Borrowers, prepare to shop.

And, potentially, to save hundreds of dollars on your next home loan, thanks to a new federal government plan that would revamp how lenders disclose home-loan terms and costs.

The plan, proposed by the U.S. Department of Housing and Urban Development, includes:

• A new standardized Good Faith Estimate (GFE) form that will explain the terms and estimated costs of your loan.

• Limits on how much your lender can increase some of your settlement costs, so you won’t be surprised by inflated costs at closing. 

• Scripts that will be read to you at closing to help ensure that you understand the terms and costs of your loan before you sign off on all your paperwork. 

• An improved settlement statement that will help you compare your final costs to your good-faith estimate.

A good-faith estimate already is required when you apply for a loan, but the forms that are used today aren’t standardized and can be difficult for borrowers to understand. Different lenders may not list the same costs in the same way and the form may not fully disclose all of the important terms of your loan.

The proposed standardized GFE will clearly detail the terms of your loan, including your interest rate and monthly payment, whether your rate and principal balance can increase, and if so, by how much, and whether your loan has a prepayment penalty or balloon payment. It also will consolidate your costs into categories and display a total of the estimated charges on the first page.

The plan is HUD’s response to a study that found many homeowners didn’t understand key terms of their own mortgage. The study concluded that clearer disclosures could help borrowers recognize loan costs, which would help them understand their loan and make better-informed decisions.

HUD’s consumer testing found that consumers were able to select the lowest cost loan more than 90 percent of the time when the proposed new form was used–a huge improvement over the typical situation. Consumers also said they liked the enhanced disclosures and scripts.

The new form won’t be official until after a comment period, and even then, it could be changed or abandoned. But if you think it might help you shop for a mortgage, you may want to print it out the new GFE form from HUD’s Web site and ask your lender to walk you through it.

Housing prices fall, sales rise
By Marcie Geffner – LendingTree.com

February was a good month for real estate, relatively speaking.

Home prices showed mixed results, the pace of home sales quickened and the supply of homes on the market shrank compared with the prior month. Taken together, these results might suggest that home buyers and sellers have begun to adjust their expectations to today’s market realities.

Mixed Prices
The median price of homes sold in the United States declined from $201,100 in January to $195,900 in February, according to the NATIONAL ASSOCIATION of REALTORS® (NAR). But while the median home price declined nationally and in approximately half of the U.S. metropolitan areas, the median price increased in the other half of the metros. Some places, such as Oklahoma City and Trenton, N.J., posted healthy gains in home prices.

These mixed results suggest that lower prices, along with affordable mortgage interest rates, may have enticed some buyers back into the market. But these results also are a good reminder that all real estate is local and that local markets can–and often do–defy national trends.

Quicker Sales Pace
The annualized pace of home sales increased from 4.89 million in January to 5.03 million in February, according to NAR. This faster pace of sales also might suggest that buyers have become more serious about their purpose. However, the sales pace has fluctuated within a fairly narrow range since last September, so the slightly faster pace in February might not represent an upward trend.

Shrinking Supply
The number of for-sale homes on the market decreased from 4.19 million in January to 4.03 million in February, NAR reported. That dip in supply could be attributed to the faster sales pace, but also might mean some sellers took their home off the market. Builders started construction on only 707,000 new houses, a 25-year low, according to the U.S. Census Bureau.

Keep in mind that one month of positive signs doesn’t necessarily mean the housing market has bottomed out or even stabilized. It’s always a good idea to watch your local market carefully and monitor your area’s trends before you make a real estate decision.

© 1998 – 2008 LendingTree, LLC. All rights reserved. No part of this article may be used or reproduced without prior written permission of LendingTree, LLC.