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8A Daily News – Friday, March 23, 2012 `First-time buyer tips for buyer's market According to the National Association of Realtors, home buying affordability is at an all- time high with the average starter home having a $638 monthly mortgage payment after 10 percent down. Umpqua Bank attributes this to low inter- est rates and favorable home prices, and sees this as an opportunity for first time home- buyers to responsibly enter the market. "As we head into the spring home buying season the inven- tory of homes for sale increas- es," said Gary Duffy, Umpqua Home Lending senior vice pres- ident. "This coupled with very low interest rates makes respon- sible home ownership more affordable than ever. Many peo- ple who thought they may not be able to purchase their own home are taking advantage of these rates and choosing to make now the time to buy." Before potential home own- ers begin looking for their dream home, Umpqua Bank recommends meeting with an experienced mortgage loan offi- cer to get a thorough under- standing of how much they can comfortably afford and borrow. To get started on the lending process, Umpqua Bank's Home Lending Division has devel- oped a checklist of considera- tions for first-time home financ- ing. Pre-approval: The first step to buying a home is getting pre- approved by your lender. This will allow buyers to develop a realistic budget for their first home and understand their vari- ous loan options. Additionally, a pre-approval or good faith estimate is required for making an offer on a house. Down payment: A solid down payment not only affects the amount a purchaser borrows from the lender, it also impacts the loan rate. Additionally, a smaller down payment may require the buyer to pay month- ly mortgage insurance. Umpqua Bank suggests homebuyers meet with their mortgage loan officers to discuss their down payment, learn about rates or formulate a savings plan to increase their down payment. Monthly payment variables: In addition to the principle and interest calculated into a month- ly mortgage payment, other monthly obligations homeown- ers should factor into their bud- get include mortgage insurance, home owner association (HOA) fees, taxes and homeowners insurance. "These additional factors can move a monthly payment sig- nificantly in either direction," said Duffy. "A $200,000 home can have the same monthly pay- ment as a $225,000 home depending on variables such as taxes and HOA fees. Potential homeowners should look beyond just the purchase price of a home, and in some cases may find they can afford a home at a higher price point because of lower property taxes." Reserves: In addition to a down payment and closing costs, lenders will ask that buy- ers have a strong reserve of funds to ensure they will be able to make their monthly pay- ments. Various assets include savings or other funds which can be counted towards a buyer's reserve. For more information about the lending process, homeown- ers should visit http://umpqua- bank.com/1.0/pages/pLoans_m ortgage.aspx?prodCAT=mort- gage. Q&A: What makes gasoline prices rise? NEW YORK (AP) — Watching the numbers on the gas pump tick ever high- er can boil the blood and lead the mind to wonder: Why are gasoline prices so high? Many stand accused, including oil companies, the president, Congress, and speculators on Wall Street. Others assume that the earth is just running out of oil. The reality, economists say, is fairly simple, but it isn't very satisfying for a dri- ver looking for someone to blame for his $75 fill-up. Last year, the average price of gasoline was higher than ever, and it hasn't gotten any better this year. The average price nationwide is $3.88 per gallon, the highest ever for March. Ten states and the District of Columbia are paying more than $4. Q: What determines the price of gasoline? A: Mainly, it's the price of crude oil, which is used to make gasoline. Oil is a glob- al commodity, traded on exchanges around the world. The main U.S. oil benchmark has averaged $103 per barrel this year. The oil used to make gaso- line at many U.S. coastal refineries has averaged $117 per barrel. Oil prices have been high in recent months because global oil demand is expect- ed to reach a record this year as the developing nations of Asia, Latin America and the Middle East increase their need for oil. There have also been minor supply disrup- tions in South Sudan, Syria and Nigeria. And oil prices have been pushed higher by traders worried that nuclear tensions with Iran could lead to more dramatic supply dis- ruptions. Iran is the world's third largest exporter. Q: How are gasoline prices set? A: When an oil producer sells to a refiner, they gener- ally agree to a price set on an exchange such as the New York Mercantile Exchange. After the oil is refined into gasoline, it is sold by the refiner to a distributor, again pegged to the price of wholesale gasoline on an exchange. Finally, gas station own- ers set their own prices based on how much they paid for their last shipment, how much they will have to pay for their next shipment, and, perhaps most impor- tantly, how much their com- petitor is charging. Gas sta- tions make very little profit on the sale of gasoline. They want to lure drivers into their convenience stores to buy coffee and soda. Oil companies and refin- ers have to accept whatever price the market settles on — it has no relation to their cost of doing business. When oil prices are high, oil companies make a lot of money, but they can't force the price of oil up. The U.S. fleet is now more fuel efficient than ever, and gasoline demand in the U.S. has fallen for 52 straight weeks. The U.S. is never again expected to con- sume as much gasoline as it did in 2006. That means that while drivers are paying more than they used to, they would have been paying much more if they con- sumed as much gasoline as they did in the middle of the last decade. Q: Are prices high because the world is running out of oil? A: Not yet. Prices are high because there's not a lot of oil that can be quickly and easily brought to market to meet demand or potential supply disruptions from nat- ural disasters or political tur- moil. Like most commodi- ties, the need for oil is so great that people will pay almost anything, in the short term, to get their hands on what might be the last avail- able barrel at any given moment. But substantial new Q: Are oil prices manipu- lated by speculators on Wall Street? A: Investment in oil futures contracts by pension funds, mutual funds, hedge funds, exchange traded funds and other investors who aren't going to actually use oil has risen dramatical- ly in the last decade. Much of this money is betting that oil prices will rise. It is pos- sible that this has inflated the price of oil — and therefore gasoline — somewhat. But investors can also bet that prices will go down, and they do. Studies of the effects of speculation on oil markets suggest that it prob- ably increases volatility, but that it doesn't have a major effect on average prices. Q: Are politicians to blame for high prices? A: Politicians can't do much to affect gasoline prices because the market for oil is global. Allowing increased drilling in the U.S. would contribute only small amounts of oil to world sup- ply, not nearly enough to affect prices. The Associat- ed Press conducted a statisti- cal analysis of 36 years of monthly inflation-adjusted gasoline prices and U.S. domestic oil production and found no statistical correla- tion between oil that comes out of U.S. wells and the price at the pump. Over the last three years, domestic oil production has risen and gasoline prices rose sharply. In the 1980s and 1990s, U.S. production fell dramatically, and prices did too. Releasing oil from emer- gency supplies held in the Strategic Petroleum Reserve could lead to a temporary dip in prices, but the market might instead take it as a signal that there is even less oil supply in the world than thought, and bid prices high- er. Any price relief from a release of reserves would be temporary. Politicians can, however, help reduce the total amount drivers pay at the pump. They could lower gasoline taxes and they can help get more fuel efficient cars into showrooms by mandating fuel economy improve- ments or subsidizing the cost of alternative-fueled vehicles. The first new fuel economy standards since 1990 are just now going into effect. Last summer the Obama Administration and automakers agreed to tough- en standards further in 2016. reserves of oil have been found in shale formations in the United States, in the Atlantic deep waters off of Africa and South America, and on the east coast of Africa. Canada has enor- mous reserves, and produc- tion is growing fast there. The Arctic, which is largely unexplored, is thought to have 25 percent of the world's known reserves. All of this oil, however is hard to get and expensive to produce. That leads ana- lysts to believe that oil will never stay much below $60 a barrel for an extended period again. As soon as oil prices fall, producers will stop developing this expen- sive oil until demand, and high prices, return. Current high prices have fueled a boom in oil exploration that is sure to bring more crude to the market in com- ing years. But it is not here yet, so for now, pump prices — and frustration — are expected to remain high.