Home Sales Fall as Buyers Cancel Contracts

Home sales fall as buyers cancel contracts

Sales of existing homes fell in June 2011 as some buyers cancelled contracts after getting cold feet. Total existing home sales, which are completed transactions that include single-family, townhouses, condos and co-ops, slipped 0.8 percent to a seasonally adjusted annual rate of 4.77 million June, down from 4.81 million in May, according to the National Association of Realtors (NAR). Home sales were down 8.8 percent from June 2010. This is a great reminder of how important it is to use a mortgage calculator before beginning the process of applying for a mortgage.

Cancelled sales contracts

"Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month," said Lawrence Yun, chief economist at the NAR. "The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16 percent of NAR members report a sales contract was cancelled in June, up from 4 percent in May, which stands out in contrast with the pattern over the past year."

Many homebuyers may be hesitant to take on a mortgage loan since the economy is still struggling to recover. There remains a lot of uncertainty about the job market and mortgage lenders are putting many borrowers through added scrutiny. As a result, some borrowers may cancel contracts out of caution, while others may be forced to abandon deals because they can't qualify for financing.

Can you afford a mortgage?

Take a hard look at your finances and run the numbers through a monthly payment calculator can give you a realistic idea of whether or not you are ready to get a home loan. There is no point in starting the mortgage application process if you have a lot of doubt about your ability to repay a mortgage loan.

Use a prequalification calculator

A prequalification calculator can give you a good idea of how mortgage lenders would view you as a potential borrower. Using this type of calculator helps determine how much mortgage you can afford based on your yearly income, debt and other factors. The prequalification calculator uses information you provide about your income, assets and current mortgage rates. Taking this step can save you a lot of heartache down the line and save you from applying for a loan before you are truly ready and getting turned down by a lender.