ots of articles have the loan for the first few years.
appeared recently about the This keeps the payments low
booming real estate market enough that the buyer can qualify
in the United States. Home for the loan. The problem is that
prices, especially on the East the buyer is only paying interest
and West coasts, are not only at and not actually contributing to
record levels, but are increasing the purchase price of the home.
at record rates. In some areas The fact that so many buyers are
around Washington, D.C. and San obtaining interest-only loans
Francisco, home prices have suggests that prices in those
tripled in the last five years. markets may be too high to be
While many homeowners have been sustained.
enjoying huge increases in their
equity, realized when they either # Many home appraisers have
sell their home or borrow against complained that lenders are
it, the market has become constantly pressuring them to
increasingly difficult for those "make the numbers" when
trying to buy homes. It may get appraising homes. Appraisers in
worse, as there are now some some modestly-appreciating
strong signs that the market may markets, such as Buffalo, NY, say
be near its peak: that they are often given a value
when assigned an appraisal, with
# The prices of homes in many the unspoken understanding that
markets are so high that few their appraisal is expected to
buyers can purchase them using come in at or above that figure.
traditional mortgages. In The lending industry is
Washington, D.C., for instance, competitive, and lenders want to
48% of new mortgages are of the issue as many loans as possible.
interest-only variety, where the It would appear that quite a few
buyer pays only the interest on of them are even willing to lend
money when the home doesn't could actually afford to make
appraise for the asking price. home payments that include a
Appraisers point out that if they reduction in principal. If a
don't provide the "requested" buyer can't afford a home without
figures, then the lenders will taking out an interest-only loan,
simply hire other appraisers. the buyer probably can't afford
the home. Buyers should be
# The foreclosure rate is suspicious of home appraisals and
increasing. The rate increased in should, if possible, ask the
March and April over the same appraiser if they are being
months last year, suggesting that pressured to provide a
more buyers may have discovered predetermined figure. Every buyer
that they have mortgages on which wants his or her home to appraise
they cannot make the payments. for at least the amount of the
The foreclosure rates are the loan. But the current market is
highest in Florida and Texas, one where buyers are straining to
which have foreclosure rates that make payments on prices that are
are nearly triple the national at record levels. The last thing
average. With interest rates near any buyer wants is to strain to
historic lows, mortgages are more make payments on a mortgage that
likely to become even less exceeds the value of the home.
affordable as interest rates The real estate market is in a
increase. precarious state at the moment,
and prospective buyers should do
What this means for prospective as much research as possible to
buyers is that they must do even make sure that they can both pay
more research before buying a for, and keep, their new home.
home. Buyers should genuinely
consider whether or not they
About the Author:
"©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com, a Website devoted to debt consolidation information and http://www.HomeEquityHelp.net, a site devoted to information on home equity loans.
Source: www.isnare.com
