10 Tips for First Time Homebuyers

10 Tips for First-Time Homebuyers

Are you a renter with a secure source of income? Is your credit history good? Do you plan to stay in the same area for at least the next four years?

If you answered yes to those questions, welcome to the housing market. It might be time to stop thinking of yourself as a tenant and begin the transition to homeownership.

You won’t be alone. According to the National Association of Realtors, about one-third of home shoppers are first-timers, meaning you’ll have plenty of competition in your likely price range. Here are some tips as you begin your search.

Get pre-qualified. Meet with a mortgage pro before starting your search so you know your price range. Fidelity Bank can give you a pre-qualification letter that shows how much house you can afford. It puts you in a stronger negotiating position because sellers know you’re serious.

Be flexible. First homes are rarely forever homes. You’ll likely move in a few years, so be willing to compromise in a way you might not for future homes. Do you really need four bedrooms and an office at this stage of life? It’s probably not realistic to expect your starter home to be your dream home.

Schools matter. You’ve heard the real estate adage: location, location, location. That’s often code for school district, school district, school district. Even if you don’t expect to have kids the entire time you’re in your first home, a respected school district will help with resale when it’s time to move up.

Keep your search manageable. Many buyers find their home within days, but that doesn’t mean house hunting has to be exhausting. Do most of your research online and limit visits to only the strongest candidates. If you see too many homes, it will be hard to keep them straight.

Take photos and notes. The first photo you take of any prospective home should be its house number. Doing so will help you stay organized because it will be easy to associate the following interior and exterior photos with the right house. Take plenty of notes, too. It’s also a good idea to rate each home on a 10-point scale as soon as you leave.

Avoid paralysis of analysis. Did you just tour the ideal home—right size, good location, reasonable price? Make an offer. Don’t look at 25 more houses to be sure. There’s a decent chance you’ll return to your ideal choice only to find that someone else beat you to it.

Think hard about that fixer-upper. Ramshackle abodes can be seductive for first-timers. “Why, with a little elbow grease, we’ll make a killing on resale!” Procced with caution. Don’t guesstimate the cost of improvements. Get hard numbers—and be sure your total investment doesn’t outstrip the going price for homes in the neighborhood.  Be sure to place a dollar value on your sweat equity, too. You don’t want to spend so much time improving your home that you never enjoy it.

Considering a condo? Ask lots of questions. Are most units owner-occupied or rented? Are the condo association’s cash reserves adequate? Are there any pending special assessments for extraordinary expenses? When analyzing your costs, don’t forget the regular monthly assessment—your share of the development’s ordinary operating expenses. Read and understand the condo documents (master deed, bylaws, rules, financial statements) to avoid surprises after you buy.

Insist on inspections. Some buyers waive inspections. You shouldn’t. Conducted after you sign a sales contract, an inspection should uncover any problems that aren’t readily apparent. If the inspector finds serious defects not disclosed by the seller, you should be able to back out of the deal. If problems are minor, you can bargain for repairs or price concessions.

The myth of 20 percent down. Don’t assume the housing market is out of reach because you can’t muster a 20 percent down payment. First-timers are often eligible for special mortgages that require little or no money down. At Fidelity Bank,for instance, we have several zero down options available.

Here’s a little secret: Life feels different when you’re a homeowner—more stable, more connected, more promising. So when it’s time to move in, expect to unpack some pride along with the dishes. Happy house hunting!

Bill Nickerson

Bill Nickerson NMLS #4194

Feel free to call me at 978.273.3227 or email me here

What rates are the Fed’s adjusting?

George Bailey at Bailey’s Savings and Loan

The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics (particularly the panic of 1907) led to the desire for central control of the monetary system in order to alleviate financial crises. Over the years, events such as the Great Depression in the 1930s and the Great Recession during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System.

What is the Fed Fund Rate?

In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. Reserve balances are amounts held at the Federal Reserve to maintain depository institutions’ reserve requirements. Institutions with surplus balances in their accounts lend those balances to institutions in need of larger balances. The federal funds rate is an important benchmark in financial markets. (This is so a “Run” on the bank will never occur again)

The Federal Reserve

The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate. The federal funds target rate is determined by a meeting of the members of the Federal Open Market Committee which normally occurs eight times a year about seven weeks apart. The committee may also hold additional meetings and implement target rate changes outside of its normal schedule.

When a Bank gets in to trouble and does not have enough funds to operate, they are allowed to borrow money from the Federal Reserve or from another Bank, the rate that is used is the Federal Fund Rate and is solely used for overnight lending from bank to bank.  This rate has been adopted by several other indexes and rates.  

The Fed Fund Rate is also used to set other Rates, the majority being adjustable rates.  Mortgage rates are influenced by the Fed Fund Rates but do not use this index to adjust.

Since the time of the Federal Fund Rate, other rates are calculated using this rate as the base rate.  The Prime Rate, Credit Card Rates, Home Equity Lines of Credit to name a few.  In the example of the Prime Lending Rate, the rate uses the Fed Fund Rate plus a margin of 3% to create the Prime Rate.  Credit Cards will use the Prime Rate as its base and then add a margin to that rate. The Federal Reserve uses open market operations to make the federal funds effective rate follow the federal funds target rate. The target rate is chosen in part to influence the money supply in the U.S. economy.

Trying to prevent panic at the Bank, George Bailey

Financial institutions are obligated by law to maintain certain levels of reserves, either as reserves with the Fed or as vault cash. The level of these reserves is determined by the outstanding assets and liabilities of each depository institution, as well as by the Fed itself, but is typically 10% of the total value of the bank’s demand accounts (depending on bank size). In the range of $9.3 million to $43.9 million, for transaction deposits (checking accounts, NOWs, and other deposits that can be used to make payments) the reserve requirement in 2007–2008 was 3 percent of the end-of-the-day daily average amount held over a two-week period. Transaction deposits over $43.9 million held at the same depository institution carried a 10 percent reserve requirement.

For example, assume a particular U.S. depository institution, in the normal course of business, issues a loan. This dispenses money and decreases the ratio of bank reserves to money loaned. If its reserve ratio drops below the legally required minimum, it must add to its reserves to remain compliant with Federal Reserve regulations. The bank can borrow the requisite funds from another bank that has a surplus in its account with the Fed. The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.

U.S. Federal Reserve Chairman Jerome Powell

The federal funds target rate is set by the governors of the Federal Reserve, which they enforce by open market operations and adjustments in the interest rate on reserves. The target rate is almost always what is meant by the media referring to the Federal Reserve “changing interest rates.” The actual federal funds rate generally lies within a range of that target rate, as the Federal Reserve cannot set an exact value through open market operations.

 Another way banks can borrow funds to keep up their required reserves is by taking a loan from the Federal Reserve itself at the discount window. These loans are subject to audit by the Fed, and the discount rate is usually higher than the federal funds rate. Confusion between these two kinds of loans often leads to confusion between the federal funds rate and the discount rate. Another difference is that while the Fed cannot set an exact federal funds rate, it does set the specific discount rate.

 The federal funds rate target is decided by the governors at Federal Open Market Committee (FOMC) meetings. The FOMC members will either increase, decrease, or leave the rate unchanged depending on the meeting’s agenda and the economic conditions of the U.S. It is possible to infer the market expectations of the FOMC decisions at future meetings from the Chicago Board of Trade (CBOT) Fed Funds futures contracts, and these probabilities are widely reported in the financial media

For information about Mortgages, Construction Loans, Lines of Credit, feel free to call or email me anytime

Bill Nickerson |  NMLS# 4194 | Flagstar Bank | 1500 District Avenue | Burlington MA |  Email | 978.273.3227

Let’s Talk Credit: Understanding your Credit Score

Did you know?credit score

  • FICO is an acronym for Fair Isaac and Company.
  • In the 1950’s, Fair Isaac and company created the mathematical calculation that is used to determine your credit score.  It is a tool that was designed to determine one’s credit score and dependability in paying bills.
  • The terms credit score and FICO score are used synonymously.

Twenty or so years ago, lenders and banks would obtain the credit scores from the credit report as a reference point.  Loans were based on the overall financial strength of a borrower and their ability to repay a loan.  The Scores were important but they were not weighed nearly as they are today when making a decision.  If scores were on the low side, compensating factors were looked at such as: additional monthly reserves, the amount of credit accounts you carried, the amount of credit accounts that carry balances, do you have a retirement accounts, etc.  Banks in general want to see that you have at least 6 months of reserves in case you should leave your job and have a few months to carry the loan.  In the case where the loan is riskier or may be a low down payment, the lender will want to see more months of reserves, upwards of 12 months.

Your credit history shows the investor your ability to repay and manage debt.  The older the line of credit, the greater the chance of the scores being higher as credit is based on history.

In today’s lending market, your credit decision is first based on the score and can have an effect on your final mortgage rate.  In general, most banks will not lend on loans with scores that are under 640 unless there is an exception or compensating factors, but this is very limited.  Many banks today won’t go below 680 and don’t allow for any compensating factors as they feel these mortgages are far too risky to have on their books.  Based on current mortgage guidelines, if your score is under 740, it will affect the price of your mortgage rate and you are penalized.

When making a credit decision, banks and lenders will pull your credit report that offers three different reporting agencies;  Experian, Trans Union and Equifax.  The middle score of the three credit bureaus is used.  Over time, these scores will be very close to each other.  Consumers who are just starting to build credit may find a discrepancy in these scores as not all creditors are required to report to all three bureaus.

Look at how a Credit Score affects your Mortgage Rate

The higher your FICO scores the less you can expect to pay for your loan.

For example, on a $200,000 Loan using a 30 YEAR FIXED RATE MORTGAGE.

Your FICO score is:

Your Interest rate is

And your payment is

740-759

3.875%

$940.47

739-720

3.990%

$953.68

700-719

4.125%

$969.30

680-699

4.250%

$983.88

660-679

4.500%

$1,013.37

640-659

4.625%

$1,028.28

As you can see in this example using a snapshot of the same day’s rate, a person with a FICO score of 760 or better will pay $88 less per month for a $200,000 30-year, fixed-rate mortgage than a person in the lowest score category.

Mortgage Rates are only used as an example and do not reflect the interest rate market of today.

Mortgage programs such as FHA allow for low credit scores so that you can get the most competitive rate but this comes with a price.  FHA will charge mortgage insurance, a monthly fee as well as an up-front fee that will be rolled into the loan amount.  After these insurance fees, a mortgage rate of 4.00% will net a rate of 5.40% with the costs of mortgage insurance that is being charged.  A mistake many borrowers make; chasing the lowest interest without truly understanding the real costs of the mortgage.

Written by Bill Nickerson

The First Selfie

 

What affects your credit?

Did you know that a large portion of your mortgage approval and mortgage rate are based on your credit scores.  In today’s market, it is now more important than ever to pay attention to your credit scores as well as the balances you keep.fico

Credit scores were developed by Fair Isaac and Company (FICO). The models created using FICO take all the detailed information about your credit report and produce your credit score using different weights and factors contained in the FICO models. The purpose of a FICO score is to show how likely you are to become at least 90 days late in making payments in the next 24 months based on patterns in your credit history, compared with patterns of millions of past customers.

Fair Isaac divides the scoring range into five risk categories

  • 780-850 low risk
  • 740-780 Medium, Low Risk
  • 690-740 Medium Risk
  • 620-690 Medium High Risk
  • 620 and Below, High Risk or “Non-Prime”

Each of the three major credit bureaus uses their own version of the FICO scoring model.

Factors influencing your credit score are:

  • Current or Late payments
  • How late the payments are
  • Number of open accounts you have
  • How much credit you are using in relation to how much credit you have available
  • If there are serious delinquencies on your file like bankruptcy, liens and charge of accounts

Your credit score is a snap shot, in that it is developed at the time of inquiry by a credit grantor pulling your credit file.  Your credit score can change with the passage of time as well as the addition of new information to your credit file.  As delinquency information in your file ages, it’s negative on your credit score lessens.

Credit Scoring is a snapshot, in that it is developed at the time of inquiry by a credit grantor pulling your credit file. Your credit score can change with the passage of time as well as with the addition of new information to your credit file. As delinquency information in your file ages, it’s negative affect on your credit score lessens.

Credit Scoring uses the following five areas of information to calculate the score:

  • Payment history 35%
  • Amounts owed 30%
  • Length of credit history 15%
  • New credit inquires 10%
  • Type of credit used 10%

It is best to keep balances low on credit cards and other revolving accounts – maintain balances below 50% of the available credit limit. 24% is optimal. The best way to improve your score is to pay down revolving debt.

An inquiry is defines as a request by a lender for a copy of an applications credit report.  Inquiries on a credit report for two years, but credit scores only look at inquiries in the last 12 months.  Your own request for a credit report to review for accuracy is not considered in question manyour credit score.

Apply for new credit accounts only when you need them. Remember that closing accounts does not make them go away. A closed account with a poor payment history may become a more recent account because the date of activity will change.  An open account with a low or zero balance is better than a closed account.

DID YOU KNOW?

  • Fico scores are used not only for a mortgage and credit cards, but for auto loans, insurance and utilities
  • Credit reports reflect charge offs or collection accounts for up to 7 years and bankruptcies for up to 10 years.
  • You can order a free credit report annually, at no charge, without impacting your credit score
  • Paying off an old collection may result in a drop in your credit score
  • Consolidating credit cards increases your ratio of debt to available credit and lowers your score.
  • Using the maximum amount on a credit line can drop your score by 100 points

For more information about how your Credit can affect your Mortgage Rate, feel free to email me at Bill’s Email or call me at 978-273-3227.

Bill Nickerson, NMLS# 4194

 

Bill Nickerson Training for the PMC

10 Things to do before listing your home

home inspection To help make the selling process easier for you, it makes sense to have your home inspected before listing it.  It may sound like a hassle but it could save you a lot of money and stress early on.  The inspection will pinpoint red flags and areas that have potential problems.  It also gives you the opportunity to address those issues before listing your home.  Having your home already inspected ultimately also gives the prospective buyers the comfort and confidence that the seller actually cared about their home in the first place.  Be sure to share this information with prospective buyers by supplying a copy of the home inspection.  It is perfectly okay to choose not to have your home inspected before listing.  If you take this route, just be sure to do your own pre-listing home inspection to keep things significantly less nerve-racking and not terribly costly before the buyer’s home inspector comes through.

Here are 10 areas to look at/fix up before listing your home.

1.  Fix any deteriorated paint jobs.  Touch up any dings on the walls or woodwork, scrape and paint any flaking areas.

2.  For furnaces over 10 years old; pay to have it serviced and cleaned.  Then display the inspection papers (store them in a Ziploc bag) by taping to furnace.

3.  Make sure all toilets are flushed.  Nothing worse than having a seldom used toilet not functioning properly.

4.  Run water down sinks and bathtub drains.  All drains need to flow steadily.  No slow drains!

5.  Check for leaks under sinks and in vanities.  Tighten up joints if necessary.

6.  Check out the condition of the roof.  You want things to look normal: no missing shingles.

7.  Clean out the gutters.  They need to be free of debris for good drainage.

8.  Open and close all windows.  Check for springs working properly so windows don’t slam down. Make sure all the locks work and windows close tightly.

9.  Test any appliances like the dishwasher that you are leaving behind.  You want them working properly. Make sure all burners/oven are working on your stove.

10.  Test the auto reverse on the garage door.  Make sure the safety mechanism works.

For more information about Home Inspectors or how to prepare to list your home, call or email me anytime.  Bill’s Email  | Phone 978.273.3227

Fed Leaves Interest Rates Unchanged… And…

A divided Federal Reserve held the line on interest rates Wednesday and indicated formally that no cuts are coming in 2019. The decision came amid divisions over what is ahead and still leaves open the possibility that policy loosening could happen before the end of the year depending on how conditions unfold.

The central bank predicts one or two rate cuts in its set of economic predictions, but not until 2020. Despite cautious wording in the post-meeting statement Wednesday, markets are still betting the Fed cuts, as soon as July.

These statements and what has been going on in the Whitehouse has caused the Bond and Treasury markets to rally hitting 2 year lows.  As a result, mortgage rates are hitting new lows everyday.  We are seeing the 30 year fixed rate at 3.75% with 0 points.  A rate we have not seen since 2017!

The U.S. central bank voted Wednesday to maintain its benchmark interest rate in a range of 2.25 percent and 2.5 percent, a move that many anticipated despite growing calls for the Fed to cut. But eight out of 17 officials penciled in rate reductions by the end of this year, which would be the first such adjustment since the economy plummeted into the depths of the Great Recession.

Language in Fed Chair Powell’s dictates the markets

The committee changed language from its May statement to indicate that economic activity is “rising at a moderate rate,” a downgrade from “solid.”

In their baseline scenario, FOMC members said they still expect “sustained expansion of economic activity” and a move toward 2% inflation but realize that “uncertainties about this outlook have increased.”

“In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective,” the statement said. The “act as appropriate to sustain the expansion” language mirrors a statement from Powell in early June.

These may seem very subtle to most, but the slight change of “Moderate” to “Solid” speaks volumes to Wall Street. Wall Street is betting on future rate cuts and the markets are reacting positively!

Mortgage Rates Continue to Drop!

With the recent news of the Feds today, mortgage rates continue the rally.  The 30 year fixed rate with 0 points 3.75% based on a 740 credit score on a single family home with 25% equity. For more details about rates and terms, call or email me anytime!

Bill Nickerson NMLS #4194 | Bill’s Email | 978-.273.3227

Before Putting Your Home on the Market

Mortgage Questions

  • Documents you will need
    • Deed
    • If you have right of ways, deed restrictions or easements get the documentation that clearly spells out the restrictions of the property.
    • Know if you are in a flood plain – FEMA’s website can be helpful.
    • Go to the Town Hall:
      • Field card at the assessor’s office
      • Get your most recent  paid tax bill
      • A plot plan
      • Title V report if it has been complete and the pumping schedule
      • Talk to the engineering department get a sense of any upcoming projects that may be done around the home.
      • Building department will have a list of all permits pulled and renovations done to the home including electrical, plumbing and addition upgrades
    • If you are in a condo
      • Condo financials to include the budget,  the last three months condo association meeting minutes and if they have it a list of current and future project that are going to be done to the properties
      • Condo Rules and Regulations
      • Master Deed and Master Insurance.
      • Verify there are no pending lawsuits with association
      • Know the owner occupancy rate of your complex
    • Home List
      • Create a list of renovations and updates that have been done to the property
      • Get utility bills for the last 12 months: Electric, oil, gas, propane, plowing, landscaping…
      • Write a letter to potential buyers of what you love about your home, neighborhood and town.

shopping for a house

For more information about selling your home, feel free to contact me anytime.  I can be reached at 978-273-3227 or email be here: Bill’s Email

DSC_0219

Bill Nickerson | NMLS #4194 | www.billnickerson.com | 978-273-3227 | bill@billnickerson.com

Mortgage Rates continue to drop… But Why?

Mortgage rates are improving every day, the treasury markets are having the biggest really since 2008!?  Why??  Actions by President Trump and the Tarrifs that are being implemented.  Fed funds futures contracts extended their rally and are now indicating more than half a percentage point of interest-rate cuts this year by the U.S. central bank.

The yield on two-year Treasuries is headed for the biggest two-day decline since January 2008 after China extended retaliatory tariffs to cover more than two-thirds of imports from the U.S, with Beijing also warning students about the risk of studying in America. Meanwhile, JPMorgan Chase & Co. slashed its targets for U.S. yields on concern that the trade war with will crimp economic growth and force the Federal Reserve to cut interest rates.

While the effective fed funds rate is at 2.39%, the rate implied for the end of 2019 by the January futures contract dropped 15 basis points on Friday to 1.855%. Central bank shifts are often done in increments of 25 basis points, and current pricing implies two cuts of that size by the end of 2019.

The shift comes amid a worldwide rally in bonds after U.S. President Donald Trump announced his plan to levy tariffs on imports from Mexico, adding further fuel to concerns about global trade tensions. Strategists at several U.S. primary dealers have also changed their forecasts to predict cuts this year from the Federal Reserve.

“Even if a deal is quickly reached with Mexico, which seems plausible, the damage to business confidence could be lasting, with consequences that might still require a Fed response,’’ JPMorgan Chase & Co. chief U.S. economist Michael Feroli said in a note to clients on Friday.

This information was provided by Bloomberg.com

Feds leave rates unchanged

The Federal Reserve left borrowing costs unchanged, continuing to delay any rate moves amid persistently low inflation.

The U.S. central bank voted unanimously Wednesday to maintain its benchmark interest rate in a range of 2.25 percent and 2.5 percent, a move that many anticipated despite stronger-than-expected growth in the first quarter of 2019 and an unemployment rate near a half-century low.

“Economic activity rose at a solid rate,” while job growth continued to be “solid, on average, in recent months,” the Federal Open Market Committee (FOMC) said in its post-meeting statement released Wednesday in Washington. “Overall inflation and inflation for items other than food and energy have declined and are running below 2 percent.”

Inflation weakness driving Fed’s patience

Following their April 30-May 1 gathering, however, Fed officials signaled that the primary driver for holding the federal funds rate steady is now inflation – and specifically why it’s continued to register below the Fed’s target during an expansion set to become the longest on record. Fed Chairman Jerome Powell said during the press conference following the meeting that those global risks had “moderated” since officials last met.

The Fed in its post-meeting statement got rid of any language saying that the economy had “slowed” from its previous robust pace and that inflation remained “near” its 2 percent target. They also noted that household spending had “slowed.”

Prices excluding food and energy, as measured by the Fed’s preferred gauge, cooled in March to 1.6 percent, the slowest pace since January 2018, according to the Department of Commerce.

“Those aren’t conditions under which the Fed feels compelled to change interest rates in either direction,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “The economy looks better than it did when the Fed last met in March, but with inflation readings continuing to decelerate, the Fed is no closer to resuming rate hikes.”

Pressure mounting for a rate cut

The Fed’s decision comes amid President Trump’s repeated calls for the U.S. central bank to cut interest rates. The chief executive on Tuesday renewed his requests in a tweet, urging the Fed to lower borrowing costs by one percentage point to send the economy “up like a rocket.”

The markets are also looking for signs of a cut. Fed watchers are betting there’s nearly a 30-percent chance that the U.S. central bank will cut rates at some point this year, according to CME Group’s FedWatch tool.

Officials, however, gave no indication of whether their next move could be a cut.  “We think our policy stance is appropriate, and we don’t see a strong reason for moving in one direction or the other,” Powell said.

information provided and written by:

Bill Nickerson of Fidelity Cooperative Bank

Federal Reserve Moves… Mortgage Rates???

janet-yellen
Janet Yellen

I wrote this blog over 2 years ago, and it applies to the same principles of today. This is also why you will see the picture of Janet Yellen to the right who has since been replaced by Jerome Powell.

Did you know in the Month of December, Mortgage Rates have dropped nearly 1/2%?  Even know the Federal Reserve has raised the key short term interest rate.

The current Fed Chair has raised rates for a fourth time this year on December 19th 2018:            (Here is the original Post from 2016) This news is bad for borrowers and consumers who may have a Home Equity Line of Credit, Revolving Credit Debt, Looking for a new Car loan or any other type of adjustable short term interest rate.  Even though this move has been widely expected, we never seem to grasp the reality of what it does.  The Fed Fund Rate has no direct tie to mortgage rates or other fixed rates in the market, it’s how the Markets perceive the comments of The Fed.

The FOMC meeting adjourned with an announcement of a quarter point increase to key short-term interest rates. Short Term interest rates are the Prime Lending Rate, Credit Cards, Car Loans to name a few. This was expected and priced in to the mortgage market over the last several days.  However,  We did get some surprises  and the bond market has not responded well to them. The biggest and most impact is that the Fed is estimating 3 or more rate hikes next year when the previous estimate was 1 or 2. That means the Fed is confident in the U.S. economy continuing to grow, making bonds less attractive. This is especially true when the Fed strongly believes that inflation will continue to strengthen. Their revised economic projections showed a slight upward revision to the GDP (1.8% to 1.9%), a downward tick in the unemployment rate (4.8% to 4.7%) and no change to core inflation (1.7%). Overall, the news has not been taken well in the stock or bond markets. The Dow is currently down 152 points while the Nasdaq is down 32 points as the rate increases are expected to restrict future economic growth and corporate earnings. The bond market is currently down 15/32 (2.52%) since the additional rate increases means the Fed feels that the economy will continue to strengthen and be able to absorb those moves. The net impact on mortgage rates is an intraday upward revision of approximately .250 of a discount at the time of this update. However, if bonds continue to slide, another increase before the end of the day is quite possible.

So What Happens?  The Financial Markets react to the shift in rate hike expectations among Fed members.  The Fed has increased the amount of times they increase the key short term rates in the future.  Thus causing Wall Street to react which will affect the Stock Market and Mortgage Markets in a Positive or Negative way depending upon the actual language of the Federal Reserve, and they use their words very carefully.  The Mortgage Markets will act the opposite of the Stock Markets…Stock Market is up, rates tend to worsen, Stock Market drops, Mortgage rates will improve.  Why? As the stock market falls, traders will pull there money from risky stocks and invest in the Bond Markets or Treasuries, known as a much safer investment which causes mortgage rates to improve.  And this can all be caused by the language the Federal Reserve uses.  Back when Alan Greenspan was in office, the markets would react to how light or heavy his briefcase was.  Yes… its this sensitive!!

What should you be doing?

If you are in the process of purchasing a home, Now is the time to reach out to your Loan Officer and request them to update your Pre-Approval in order to reflect the higher mortgage rates.  Rates, depending upon when the Pre-Approval was issued, could be up as high as 3/4’s to a full percent.  That equates to over $100 in a monthly payment for loans above $200,00 and in some cases even more.

 

For More Information about Mortgage Rates, Loan Approvals and mortgages that are best suited to your financial needs, contact me anytime at 978-273-3227 or  email me  and  you can always visit my mortgage site at www.billnickerson.com

Bill Nickerson
William Nickerson

 

 

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