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

 

 

FNMA (Fannie Mae) Raises Loan Limits!!

fnmaIf you remember the 90’s and the early part of the 2000’s, you expected Fannie Mae to raise its Loan Limit for residential loans. It was a sign of the times and the Housing Market was booming!  When I first started in 1991, the loan limit was $191,250.  This was the maximum conforming loan amount Fannie Mae would grant under the Fannie Mae guidelines.  Loan amounts over that were considered Jumbo Mortgages, typically higher rates and stricter guidelines.

Since 2006, the loan limit has been set at $417,000 for single family homes and condominiums.  These loan limits had not been raised for 10 years and now for the third year in a row, the loam limits have been raised again!  This is great news for the housing markets and will free up more credit in housing. In 2019, the new Fannie Mae Loan Limit will be set at $484,350.  This will also allow Mass Housing (MHFA) to have increased loan limits as well and create more borrowing power for the consumer.

Here the new Loan Limits:

One Unit Limit –

$484,350

Two Unit Limit –

$620,200

Three Unit Limit –

$749,650

Four Unit Limit –

$931,600

This increase has been expected, it is also a sign that the Housing Market is moving in the right direction.  With the new increased Conforming Loan Limits, economist say this will continue to boost the economy especially with Mortgage Rates on the rise.

Conforming Loan Amounts allow for several different Down Payment options and in some cases will allow for 0% down through some of the housing agencies.  Compared to Jumbo Mortgages which require 10% down or greater as well as requiring a FICO score of 700 or greater.

Please leave a comment, email or call me anytime with questions you may have about mortgage programs, rates and to get approved for a mortgage.

   NMLS# 4194  www.billnickerson.com  978-273-3227

Bill Nickerson

My 11th Pan Mass Challenge

Team Lick Cancer riding in formation on Cape Cod

11th Pan Mass Challenge 

I ride for a reason and I ride for a cause and because of this,  I ride with No Pain, I Ride in the cold, I ride in the rain, I ride for hours upon hours so that I can help those who can’t ride.

This will be my 11th year riding in the Pan Mass Challenge.   It comes with great reward as I am building friendships and raising money for a worthy cause…cancer research.  It also comes with great heart ache.  The more friends and family I meet in the PMC, I unfortunately more and more that are battling cancer.  Charlotte who was only 6 years old and fought a long hard 4 year battle.  Charlotte had an aggressive brain tumor known as atypical teratoid rhabdoid tumor (AT/RT). Despite treatment after treatment, trips into Boston on a daily basis, experimental medicine and everything some of the best doctors in the world could do for her; it was just not enough.  While enduring all of this, Charlotte taught us all how to live and to enjoy life to the fullest.  She never stopped being a kid!!!  My thoughts and prayers will always be with this special little girl who touched so many of our lives.  I must ride on, I must raise money, I am fighting cancer!!  DONATE

Our team is growing every year as we will have over  160 members riding in this year’s PMC.  Our team will raise over 1 Million Dollars this year alone.

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The Pan Mass Challenge is exactly that….a challenge.   Anyone that knows me knows that I am not built for speed. But I knew in my heart that I could do something like this especially for a great cause. I train for months to be in shape to ride the 192 miles from Sturbridge to Provincetown…riding to work a few days and taking long rides on the weekends. But there is something that I can never train for…the arrival day in Sturbridge.  The opening ceremony of the PMC, the stories of cancer survivors, the families involved and especially the Kids that are affected.  To hear and see what people with cancer must go through, gives me all the motivation I need to ride 192 miles in the middle of August.  DONATE NOW

As I ride along the 192 mile route, I see families lined up on every street holding up signs thanking me.  Never in my wildest dreams did I expect this; to be thanked for riding for them.  They stand there holding signs, playing music and yelling to cheer me and my teammates on…it is such a motivating emotional sight to behold.  A sight that makes me tear up just thinking about it.  I know that my feelings are nothing compared to what these kids and families experience as they go through treatments.  It is for them that I ride.  I am officially a Pan Mass rider for LIFE!       I need your help to aid in the continued research for finding a cure for this deadly disease.   Will you help me raise money for this fight?

HELP ME RAISE MONEY TO FIGHT CANCER!!!!!   

Thank you for your continued support!!!!  Bill Nickerson

Click here to DONATE

seacoast ride

1% increase in mortgage rates will cost you $50k in Buying Power!

Percent DownWe have seen mortgage rates as low as 3.250% in Fall of 2016 to a high of 5.25%  in October 2018.  We have to readjust our purchasing power and how these rates can affect how much we can afford for a home.  This means going to your lender and having your “Pre-Approval” updated to reflect the current mortgage rate of today.  This will bring your purchase price down.

You can see with the increase in mortgage rates, it brings down the amount of Home you can afford.  It equates to about $50,000 for each 1% movement in mortgage rates.  This may vary depending upon the real estate taxes and homeowners insurance but gives you a good idea of waiting can cost you.   Over the last several years, we have been spoiled with artificially low mortgage rates.

The Federal Reserve Chair Jerome Powell is new to the position as of February 2018 and is learning how sensitive a job this is.  With the wrong choice of words, body language, overstuffed briefcase, it can and will affect the markets.  In May of 2018 we reached new highs in the Bond Markets causing mortgage rates to rise even more. The Feds aggressive stance on raising rates has pushed the 30 Year Fixed rates up over 5.00%  The fear of inflation and a volatile Stock market has mortgage rates rising everyday at the moment.  Although these rate hikes do not directly affect mortgage rates, they will cause an increase in overall living expenses. This is the first time in 10 Years that the Federal Reserve has started to  increase rates.  Click here to learn more about mortgage rates

Economists have been warning us for the last few years, mortgage rates have to go up!  The longer you wait, the more it will cost to buy a home. Or another way to look at this, you buying power could drop by 10% or more for each 1% increase in mortgage rate.  Buy now while the mortgage rates are still low as we may not see these rates again in our lifetime!!

For more information on Mortgage Rates and Programs, feel free to call me at 978-273-3227 or email me .

Bill Nickerson
Bill Nickerson

Senior Loan Officer | NMLS #4194 | bill@billnickerson.com

 

3% Down and No Mortgage Insurance on 2, 3 and 4 Family Homes

Mortgage QuestionsWith the announcement from Fannie Mae of increased loan limits for 2019. Not only are the Fannie Mae loans benefiting, so are the MassHousing loans!  Did you know that Mass Housing (MHFA) loans are a safe and affordable alternative to FHA Mortgages.  Did you know the Mortgage Insurance for FHA never goes away!  Mass Housing still offers its mortgage program that features Low Down Payments, as little as 3% down with No Mortgage Insurance!  This product provides financing (purchase or refinance) up to 97% of the appraised value of the home without the hefty mortgage insurance payments that are typically associated with low down payment programs. MHFA follows Fannie Mae Guidelines, which means the traditional loan limit is $484,1350!Percent Down

This special program is available for owner occupied; one to four family properties including condominiums on both purchase and refinance transactions. With a low fixed rate, the down payment can be a gift on single family homes.  The MassHousing Mortgage with No Mortgage Insurance is a great choice for low and moderate income home buyers.

The 2019 Fannie Mae Loan Limits

  • 1 Family Loan Amount of $484,350
  • 2 Family Loan Amount of $620,200
  • 3 Family Loan Amount of $749,650
  • 4 Family Loan Amount of $931,600

Features of the Mass Housing Loans for 1 to 4 family homes

  • As little as 3% down on single-family homes and condos
  • As little as 5% down on 2, 3 and 4-family homes
    • 3 and 4 Family require 700 Credit Score
  • No mortgage insurance required
  • Income limits as high as $123,660 in many cities and towns
  • Fannie Mae loan limits apply, borrower up to $484,350
  • Approved community second mortgages allowed
  • Credit scores as low as 660 (additional conditions may apply)

Advantages:

  • Gift funds can be the source of the down payment on single family homes
  • The interest rate will never increase
  • Competitive fixed rates
  • Safe, fixed-rate limited cash-out refinance option

imagesCA0QSEZO

Call me to learn why this innovative program is an attractive alternative to an FHA mortgage!  Remember, this program allows for the same low down payment options as FHA with no mortgage insurance. 

Bill Nickerson

Have a Great Labor Day!

labor dayWhat does Labor Day mean to us?

To many, it means the end of summer. To others, it means the beginning of school. Those are accurate assumptions but Labor Day is really much more. Labor Day  will be observed on Monday, Sept. 3 2018.

Labor Day: How it Came About & What it Means
Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.

Founder of Labor Day
More than 100 years after the first Labor Day observance, there is still some doubt as to who first proposed the holiday for workers.

Some records show that Peter J. McGuire, general secretary of the Brotherhood of Carpenters and Joiners and a cofounder of the American Federation of Labor, was first in suggesting a day to honor those “who from rude nature have delved and carved all the grandeur we behold.”

But Peter McGuire’s place in Labor Day history has not gone unchallenged. Many believe that Matthew Maguire, a machinist, not Peter McGuire, founded the holiday. Recent research seems to support the contention that Matthew Maguire, later the secretary of Local 344 of the International Association of Machinists in Paterson, N.J., proposed the holiday in 1882 while serving as secretary of the Central Labor Union in New York. What is clear is that the Central Labor Union adopted a Labor Day proposal and appointed a committee to plan a demonstration and picnic.

The First Labor Day
The first Labor Day holiday was celebrated on Tuesday, September 5, 1882, in New York City, in accordance with the plans of the Central Labor Union. The Central Labor Union held its second Labor Day holiday just a year later, on September 5, 1883.

In 1884 the first Monday in September was selected as the holiday, as originally proposed, and the Central Labor Union urged similar organizations in other cities to follow the example of New York and celebrate a “workingmen’s holiday” on that date. The idea spread with the growth of labor organizations, and in 1885 Labor Day was celebrated in many industrial centers of the country.

Labor Day Legislation
Through the years the nation gave increasing emphasis to Labor Day. The first governmental recognition came through municipal ordinances passed during 1885 and 1886. From them developed the movement to secure state legislation. The first state bill was introduced into the New York legislature, but the first to become law was passed by Oregon on February 21, 1887. During the year four more states — Colorado, Massachusetts, New Jersey, and New York — created the Labor Day holiday by legislative enactment. By the end of the decade Connecticut, Nebraska, and Pennsylvania had followed suit. By 1894, 23 other states had adopted the holiday in honor of workers, and on June 28 of that year, Congress passed an act making the first Monday in September of each year a legal holiday in the District of Columbia and the territories.

A Nationwide Holiday
The form that the observance and celebration of Labor Day should take were outlined in the first proposal of the holiday — a street parade to exhibit to the public “the strength and esprit de corps of the trade and labor organizations” of the community, followed by a festival for the recreation and amusement of the workers and their families. This became the pattern for the celebrations of Labor Day. Speeches by prominent men and women were introduced later, as more emphasis was placed upon the economic and civic significance of the holiday. Still later, by a resolution of the American Federation of Labor convention of 1909, the Sunday preceding Labor Day was adopted as Labor Sunday and dedicated to the spiritual and educational aspects of the labor movement.

The character of the Labor Day celebration has undergone a change in recent years, especially in large industrial centers where mass displays and huge parades have proved a problem. This change, however, is more a shift in emphasis and medium of expression. Labor Day addresses by leading union officials, industrialists, educators, clerics and government officials are given wide coverage in newspapers, radio, and television.

The vital force of labor added materially to the highest standard of living and the greatest production the world has ever known and has brought us closer to the realization of our traditional ideals of economic and political democracy. It is appropriate, therefore, that the nation pay tribute on Labor Day to the creator of so much of the nation’s strength, freedom, and leadership — the American worker.

I credit the following site for information about Labor Day http://www.dol.gov/opa/aboutdol/laborday.htm
 
Bill Nickerson NMLS #4194
Bill Nickerson

 

What are Closing Costs?

Closing costs are an accumulation of charges paid to different entities associated with the buying and selling of real estate. For buyers in Massachusetts, closing costs will come to about $3500 plus lenders title insurance and any pre-paid items such as real estate taxes, insurance and interest. Empty Piggy Bank

There may be closing costs customary or unique to a certain locality, but closing costs are usually made up of the following:

Third Party Fees (The Hard Costs)

  • Attorney’s fees (yours and your lender’s if applicable)
  • Appraisal
  • Credit Report Fee
  • Lenders administrative costs
  • Recording fees
  • Plot Plan or Survey fee
  • Title insurance (yours and your lender’s)
  • Loan discount points (click to the left to see if points are worth it)
  • Any documentation preparation fees

Pre-Paid Items:

  • Property taxes (to cover tax period to date)
  • Interest (paid from date of closing to the following first of the month)
  • First payment to escrow account for future real estate taxes and insurance
    • 3 to 4 months of real estate taxes to be held in escrow
    • 2 months of homeowners insurance to be held in escrow
  • Paid receipt for homeowner’s insurance policy (including fire and flood insurance if applicable)
  • First premium of mortgage insurance (if applicable)

Additional Items that No One Tells You About:

  • Purchase and Sales Review
  • Recorded Homestead Act
  • Representation from a real estate attorney other than what the bank provides
  • Home Inspection
  • One Year of Homeowners Insurance up front
  • Owners Title Insurance
  • Buying the Oil in the Oil Tank of your new home

For more details regarding these items, please see my blog post: Home Buying Closing Costs: What to Expect

Or for more clarification on closing costs and how you can save your buyers money, feel free to contact me anytime at bill@billnickerson.com 

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Can I give you a Piggy Back?

Whether you call them Piggy Back Loans, Blended Mortgages, A first and second, 80-10-10, these loans are extremely helpful in avoiding Private Mortgage Insurance (PMI).

Piggy Back
The Piggy Back

When you have less than 20% to put down on a home, you are charged Private Mortgage Insurance, this added cost is based on the actual down payment as well as your credit score and in some cases can be in the hundreds of dollars per month.   Several years ago, many banks, lenders and mortgage companies created a program that would allow having a first and second mortgage to avoid the high cost of mortgage insurance.  At the end of the Housing Bubble, many banks, lenders and mortgage companies went out of business, these second mortgage and lines of credit nearly disappeared.  They were still available, they were just really hard to find.

Based on your purchase price, you would take out a first mortgage in the amount of 80% of the price and a second loan in the amount of 10%.  You would still be borrowing 90% of the purchase price (10% down payment).  In doing so, you have lowered the loan-to-value ratio (LTV) of a first position mortgage to under 80%, thereby eliminating the need for private mortgage insurance (PMI).

Example: Here is a comparison of using the Piggy Back Mortgage versus a mortgage with PMI.  This is based on a purchase price of $400,000 with 10% down on a single family home and assuming a credit score of 740 or greater.

Without the Piggy-Back:  You would have a first mortgage of $360,000, using a mortgage rate of 4.5% on a 30 year fixed.  This would give you a mortgage payment with PMI in the amount of $1,980.07.  $156 of this payment would be PMI.  PMI payments do vary based on the actual down payment as well as the credit score of the borrower, but this will give you a good idea of what the payment would be.

With a Piggy-Back loan using the same purchase price.  In this example you would have a first mortgage in the amount of 80% of the purchase price, $320,000 and a second mortgage in the amount of $40,000.  The second mortgage can also be a line of credit and in both cases the second mortgage rates is typically higher.  Using a rate of 6.00% for the second, this gives you a total mortgage payment of $1,861.21.  This is a total savings of $118.86 per month.  This is a conservative estimate.

The savings can be in the hundreds, most of these piggy-backs are in the form of a Line of Credit (home equity line of credit) and are adjustable rate products.  This rate is tied to the Prime Rate that the Federal Reserve sets and can be adjusted a few times a year.   Even though the rates are still at all-time lows, these lines of credit will go up in the future.  When obtaining a piggy-back mortgage, you  need to have a strong financial plan of how you can either make additional payments to this loan or be in a position to pay it off within several years.

For more information in regards to Piggy Back mortgages and other programs that eliminate mortgage insurance, feel free to call or email me anytime.

Bill Nickerson -NMLS #4194  978-273-3227 cell

 Bill Nickerson 

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