Why it is so important to get Pre-Approved!

It’s always been a good idea to get pre-approved for your mortgage loan, but lately, it’s become even more important.

Why should I be pre-approved for a mortgage loan?

In recent years, mortgage guidelines have been tightened. Documentation requirements have been expanded and followed more closely. A pre-approval gets you through the process and uncovers potential pitfalls long before you become obligated by a contract to purchase.

What advantages will I have once pre-approved?
You’ll be certain about the price range that’s best for you. You’ll know how much cash you’ll need to close, and you’ll know your maximum monthly payment. Understanding your limits will help you negotiate with confidence. Plus, since sellers like a sure thing, you’ll have an advantage over buyers who may not have been through the process.

How long is the pre-approval valid?
Your pre-approval is typically good for the “shelf life” of the documents used. These will include a credit report, pay stubs, bank statements, W2s, tax returns, etc. The usable life of these documents will vary, yet it’s usually safe to say that your approval is good for up to three or four months. During this time, it pays to file all important financial documents so they’re readily available for future updates.

What if I change my mind?
That’s perfectly fine. There’s no obligation to purchase a home or use a particular loan program once you’ve been pre-approved. In fact, pre-approval simply helps to assure you know exactly what’s involved, that you are comfortable in a particular price range and that you are truly ready to make your move.

The process of purchasing a home is easier when you have financing in place before you make an offer. We’re here to help get you started, and it’s never too early to do exactly that. Give me a call when you’re ready.

Bill Nickerson | NMLS# 4194 | Mortgage Financial | bnickerson@mfsinc.com |   | 978-273-3227 |  10 Elm Street, Danvers MA 01923 |

Adjustable Rates 101

An Adjustable Rate Mortgage provides a specific fixed rate term before becoming an adjustable mortgage.  An example: A 10/1 ARM is fixed for the first 10 years and then becomes a 1 year adjustable rate for the remaining term of the mortgage, thus giving you 10 years  of security at a fixed rate.

Advantages: If you know that you are selling your home in a short period of time, 10-12 years or less, you can get a mortgage rate that is 3/4’s to 1 full percent below the traditional mortgage rates.  Today a 10 year ARM is 3.25% and you can borrower up to 2 Million Dollars.

How do they work?

Adjustable Rate Mortgages (ARM’s) come in many different varieties.  The most common ARM’s are the following:  Three Year, Five Year, Seven Year and a Ten Year.  You will also see them displayed in this format as well:  3/1, 5/1, 7/1 and 10/1.  The first number represents the amount of years the loan will be fixed for and will not change from its original start rate.  The higher the first number or term, the higher the interest rate will be.

The second number represents how often the ARM will adjust after the fixed rate term ends.  Using a 5/1 ARM as the example, when your fixed term is about to expire, the Lender will send you a notice via mail notifying you that your rate is about to adjust and what that adjustment will be.  This will occur 45 days prior to this expiration date, in this case that would be 60 months in to this loan (5 Years). The new rate will be set for one year, or the term that is stated in the second number, 5/1.

The adjustments are based on 2 variables, the index and the margin.  The margin is set on the day you get the mortgage and is usually in the range of 2.25 or 2.75 depending upon the type of ARM you go with.  This will never change and is set for the life of the loan.  We would then add the current Index to this margin and combined that would create your new rate.

The Index can come from many places but is selected when we lock in your loan.  Typically we use the One Year Treasury Bill or the One Year LIBOR.  Both indexes move fairly slowly.  These Indexes are always posted in the Wall Street Journal but is very easy just to Google these terms. This will show you the current rate as well as show the history of these rates. You can also click this site at the US Treasury

Today’s one year treasury is at 1.30, this is the index.  Add this to the margin of 2.50 and your new rate today would be 3.875%. This rate would be rounded up to the next highest 1/8^th and this would give us 3.875% for one year.  Remember, this is what the rate would adjust to after the fixed term has ended.

Caps: Your loan comes with caps of 5/2/5, each number represents how your loan will adjust.  With the first adjustment the loan can adjust 5% up or down from the original start rate. The second number “2” is what it can adjust each time for the remaining years of the loan.  So, the second adjustment and every one after that the rate can move up or down a maximum of 2%.  The last number is the Life Cap.  This rate will never go higher than 5% of the starting rate.  So if you lock in a rate of 3.25% today, your rate would never exceed 8.25%.  To give you an idea, since 1996, this rate has not exceeded 8.25% at its high point. In the last several years, this rate as adjusted downward and as low as 2.00% in many cases.

I hope this is helpful. Always feel free to ask questions about any of this information. Email me at Bill@billnickerson.com or call 978-273-3227.

Thank you very much,

Bill Nickerson NMLS# 4194 | Flagstar Bank| 1500 District Avenue, Burlington MA

Is It Impossible to Get a Mortgage Loan?

The Challenges:

With the numbers of recent foreclosures, lenders are having to re-purchase defaulted loans, often for minor technicalities. Losses incurred by some companies have forced them out of business.

As a result, not only have lending rules tightened, but underwriters are also being forced to follow them to the letter and beyond.

The Solutions:

Advance preparation and the right documentation will help streamline the process.

Your Money: All necessary funds must be verified, and deposits must be documented. Make copies of all checks and deposit slips.

Your Debts: Avoid delays by refraining from applying for or opening any new credit accounts.

Your Income: Expect verification through paystubs, written and verbal confirmations, tax returns, IRS transcripts, etc. All new employment or forms of variable income beyond regular wages (bonus, commission, alimony, dividends, etc.) are subject to rules of history and continuance. Do not depend on this income until we discuss its acceptability.

Your Credit: Score requirements have increased. If you’re not already, you need to be extra mindful of managing your debts. To help protect your score:

• Do not close old or unused accounts.
• Do maintain high lines and low balance ratios.
• Do not transfer balances to a brand new card (at least not before buying or refinancing).
• Do not use your extra cash to pay off debt. Sometimes, it’s better to have the cash than slightly lower balances.

Other factors can be at play, too, but the most important thing to remember is that it’s never too early to seek personalized advice. I work with mortgage loans every day, and I’m here to help you prepare so you can sail through the process when the opportunity is right.

Financing is still abundantly available. It simply goes most easily to those who plan ahead.

Bill Nickerson | NMLS #4194 | Mortgage Financial | 10 Elm Street, Danvers MA |  978-273-3227 | bnickerson@mfsinc.com | http://www.billnickerson.com

LendUS LLC, DBA Mortgage Financial is a Residential Mortgage Licensee. Massachusetts Mortgage Lender and Broker #MC1938, Licensed by the New Hampshire Banking Department License #5593-MB. Vermont Lender License #6207, Maine Supervised Lender License #SLM3129, Connecticut Lender License #MLD476, Florida NMLS License #MLD1178, NMLS #1938 – Equal Housing Lender.

 

Do You Know How To OPT OUT?

In the recent events that took place with Equifax that compromised 140 Million consumers. It is extremely important to know how to OPT OUT of any of these solicitations so that you don’t become one of the statistics.

 The bad news: It is common practice for the three credit repositories (Experian, Equifax and TransUnion) to compile and resell consumer data to marketers. In fact, they make a lot of money sharing our names, addresses and other demographic information. The ironic thing about these “pre-approved” offers is that the marketers do not know enough about you or your credit to approve you without a full application – so you’re not really “pre-approved” after all.

The good news: You can remove your name from all of this. Under Federal law you have the right to “opt-out” from all pre-screened offers by calling (888) 567-8688 or going online to http://www.optoutprescreen.com  A 1996 amendment to the Fair Credit Reporting Act required that the credit bureaus provide an opt-out opportunity for consumers who do not want their names and addresses sold to credit grantors for solicitations. Consumers can and should take advantage of the right.

If you aren’t tired of shredding pre-approved credit card offers and don’t mind having your personal information shared with third parties, there is another reason to opt-out of prescreened offers: identity theft. Imagine a “pre-approved” credit card offer going to a previous address, whose hands is this application falling into? Eliminating the risk can stop ID theft before it starts.

You can go onto the FTC website for further information about opting out at http://www.ftc.gov. By opting out you will no longer receive pre-approved credit offers. If you are interested in learning more about how the credit game works and how you can maximize your credit scores, I recommend picking up a copy of The Credit Road Map at http://www.Amazon.com or http://www.TheCreditRoadMap.com.

I hope you have found this information useful and informative. If I can ever be of service to you or your friends/family, please don’t hesitate to contact me anytime.

Sincerely,

Bill Nickerson

Mortgage Financial | Senior Loan Officer | NMLS #4194 | Phone: (978) 273-3227 | bnickerson@mfsinc.com | http://www.mfsinc.com/bnickerson |