Discount Points are often recommended to by down the interest rate for your loan. Be careful. The normal cost is around 1% of your loan amount and the point will only bring your interest rate down around 1/8%. Many times it is not worth this added cost.

Origination fees are what lenders make you pay for you to borrow money that they will make a huge amount of money off of over the life of your loan. Typically the origination fees are around 1% to 2% for most traditional loans.

APR is the actually cost of borrowing the money. It includes the interest and other costs averaged out. It is always higher than the quoted interest rate.

Escrow is the money that is put in reserved to pay the home owner’s insurance, taxes and other expenses. A portion of each payment made to the mortgage company will go into the escrow account. Depending on the time of year, it is possible that some money will have to be paid into the escrow at the beginning of the loan.

Closing costs are all the fees that will have to be paid when the loan is closed out. Usually it will include the real estate broker fees, survey, appraisal and lawyer. Sometimes the closing costs can be rolled into the loan. Sometimes the closing costs will have to be paid upfront.

There is more to buying a home than finding one that fits your needs and wants. You have to learn about the industry to make sure that you keep your head above the financial waters.

Consumers are responsible for what they buy and the terms negotiated for the purchase.  The main problem is that consumers’ eyes are too big for their wallet.  I know couples now, who are struggling with their finances, who have a five bedroom home and only four family members.  The idea of getting a smaller home (that would be easier to maintain, have the family interacting more often, and cost hundreds of less per month) seems not only foreign to these folks, but almost insulting.

If the buyers would only spend what they could actually afford - instead of buying something they MIGHT be able to pay for if a new raise comes through or a new job, then they wouldn’t be complaining about the cost of the subprime mortgages because they wouldn’t have one.

This finance crisis should be a hard lesson learned by all - but specifically the borrowers.  If something sounds too good to be true that is because it is.  If the government bails out the troubled industry or the consumers, no one will ever learn.

The housing market was beginning to slow.  Interest rates had hit the lowest in many years.  Lenders were desperate to keep the houses moving and the money flowing.  Unfortunately, most of the top borrowers had already borrowed everything that they could. 

This is when the industry began to plunge itself into the despair where it now lays.  It began to develop programs for the “less than ideal” borrower.  The Lenders seemed to be more concerned about getting the next contract than they were about insuring the contract would be fulfilled.  As the interest rates began to inch upwards, the borrowers (that couldn’t really afford to borrow in the first place) found themselves lodged in a tight space.

Now the foreclosure rate is going through the roof instead of the profits that Lenders were hoping for.  Some have suggested that there needs to be some kind of bail out.  I say, let the chips fall where they may.  It may take a little time, but the housing market will eventually find its feet again.

We live in a rural community with a fairly small population.  Every time a large track of land is sold, a subdivision soon pops up on it.  The population hasn’t grown, but the number of homes available has skyrocketed.  More than once I have pondered how this is possible.

From everything I have read about the real-estate market over the last several years, it was MADE possible by lenders desperate to make loans.  After the legitimate market was dried up, lenders began extending credit to consumers that would not have qualified before.

Not only that, but the size of the loans continued to grow because the payments were spread out over more years (it’s possible to get a fifty year mortgage and a sixty year mortgage is in the near future).  Even with all the lenders adjustments, borrowers’ eyes were bigger than their pocket book and payments were still just barely manageable. 

Now the rising interest rates are pushing payments beyond the means of the borrowers.  Lenders have to foreclose, and worse, they are getting stuck with the properties because of a saturated market.

There is not much sympathy in me for this real estate market or those caught in the turmoil.  The lenders and the borrowers have equally made a mess of things. 

  1.      Never underestimate the value of curb appeal.  The very first impression of your property could make or break a potential sale.  It can also affect the value of an appraisal.  Take some time to approach your house from different directions.  What is the first thing you notice?  It may be that all your yard needs is a little trim in the bushes and some color (in the form of annuals) along the walk.  The house may need a good cleaning, or a fresh coat of paint.  A little time and effort spent on the first impression can mean more money in your pocket down the road.

 2.      Don’t over due your personal taste.  Save your eclectic tastes for accents (like paintings or pillows or curtains) that can easily be removed.  Bold colors, strong prints, or dated fabrics can push down the value of your home.

 3.      Get rid of the clutter in your home.  Having a clear, crisp room will open the space and make it more inviting.  In the end, this can translate into a higher value.

 4.      Go for the clean scent.  Heavy room deodorizers can be overpowering, and it can leave the impression that you are trying to hide something.  It is better to spend some money to have the carpet professionally cleaned and have a clean, fresh scent for your home.

It may not seem important, but the impression your home gives people will affect the value.  Whether you are trying to sell or just getting an appraisal, take the time before hand to make your home the best on the block.