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).

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 

Is Your Glass Half Full or Half Empty?

A psychologist walked around a room while teaching stress management to an audience. As she raised a glass of water, everyone expected they’d be asked the “half empty or half full” question. Instead, with a smile on her face, she inquired: “How heavy is this glass of water?”

Answers called out ranged from 8 oz. to 20 oz.

She replied, “The absolute weight doesn’t matter. It depends on how long I hold it. If I hold it for a minute, it’s not a problem. If I hold it for an hour, I’ll have an ache in my arm. If I hold it for a day, my arm will feel numb and paralyzed. In each case, the weight of the glass doesn’t change, but the longer I hold it, the heavier it becomes.”

She continued, “The stresses and worries in life are like that glass of water. Think about them for a while and nothing happens. Think about them a bit longer and they begin to hurt. And if you think about them all day long, you will feel paralyzed – incapable of doing anything.”

Remember to put the glass down…

I found this on the internet of course, and could not find a source to give credit.  It was a very clear message and wanted to share it.  Enjoy!  ~Bill

 

Bill Nickerson has been in the Mortgage Industry since 1991.  Feel free to contact him at 978-273-3227 or email at bill@billnickerson.com

Old School Selfie

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

Pre-Qualification vs. Pre-Approval

In Today’s Real Estate Market, it is more important than ever to have a Pre-Qualification in hand when shopping for a home that has been prepared by a reputable Lender, Bank or Credit Union.  The terminology has changed from Pre-Approval to Pre-Qualification depending upon the detail of the Approval provided.

Pre-Qualification

A mortgage loan pre-qualification is an estimate of how much house you can afford and how much money a lender would be willing to loan you.  The best time to get pre-qualified is right before you start looking at homes.  This way you can focus on looking at houses that are within your price range.  By providing a loan officer with your income, assets, debts, and a potential down payment amount, he would then be able to give you a ballpark figure of how much he thinks you could afford to pay for a monthly mortgage.  Your Credit is reviewed and your loan is submitted through an Automated Underwriting Service (AUS). There is no cost to this service and no commitment is required.  This estimate is a helpful tool to you in figuring out if buying a home is a viable option, and if so, what your price range would probably be. A pre-qualification is to give you a range of home prices and in no way is a commitment to lend on a home. The time frame for this is less than 24 hours.

Pre-Approval

Getting pre-approved means that you have a tentative written commitment from a lender for mortgage funding.  In the pre-approval process, you provide a loan officer with actual documentation of your income, assets, and debts.   The Loan Officer is submitting this as if it is an actual loan and a property has been identified.  This will be reviewed by the lenders underwriting team.  The lender will run a credit check and verify all your employment and financial information. Once the final approval comes in, the lender will give you a letter of commitment stating how much money the bank is willing to loan you for a home purchase. Having a certified pre-approval in hand when you start house hunting lets real estate agents and sellers know you are serious about buying when they see you have your mortgage funding in place.  By having your funding in place, it becomes an extreme advantage over other buyers when it comes to negotiating your home purchase as your offer will stand above the rest and you will be able to close in a much shorter time period. The timeframe for a Pre-Approval can take up to 5 Business Days.

It is important to note that a pre-approval and a pre-commitment is still subject to further review as any loan is.  As variables change in lending or in the borrowers financial picture, additional items may be required. In addition to the financial commitment, the lender will also need to verify the property appraisal and title search.

Bottom Line:     

Pre-Qualification is an estimate of a price range of what you can afford by verifying credit, income and running your loan through an Automated Underwriting System such as Fannie Mae or FHA as well as others.     Pre-Approval is a verified commitment from the bank stating how much money it will loan you. Make sure your Pre-Approval is an actual commitment from the bank as opposed to a Loan Officer just doing a quick credit check.

For More Information about Loan Approvals, Loan Programs 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

Lock your Rate up to 180 Days, then Re-Lock it!

What if I were to tell you that I have a special mortgage program??

What if I were to tell you I have some of the best mortgage rates??

What if I were to tell you I have very competitive closing costs??

Yup…ordinary, just like all the other mortgage companies, banks, credit unions etc!  Pretty dull and boring when it comes right down to it.

Relock Today!

But what if I were tell you that you could lock your mortgage rate in at todays rate and if the rate drops during the process of your mortgage, you could re-lock to the lower rate.  And…It’s FREE!!  Yes, FREE!  No additional premiums, no inflated start rate and it’s offered on fixed rate mortgages.

Buying new construction or Building a new home?  These homes can typically take 3 to 6 months to complete.  In this volatile market of rates changing daily, you can lock in your mortgage rate for 180 days and if the rates drop, you can take advantage of the lower rates.  This allows you the security locking and peace of mind knowing you can still float your mortgage rate down.

But Wait!!!  There’s more!!!  What if you don’t have a signed offer on hand or have even identified a home?  How about if I told you that you could LOCK into a mortgage rate while you were shopping for homes.  This allows you focus on your new home and not have to worry about the markets and at what point rates will move.

This is for fixed rates mortgages up to $417,000.  Don’t be fooled by other lenders that offer these programs and then require you to use an Adjustable Rate or charge you a premium.    I have attached a flyer so that you can share this great program with your friends, clients, builders and whom ever may be in the market.

Click here for your own Float Down Flyer: Float Down

You must have applied for a mortgage through Bill Nickerson and PrimeLending.  You must meet Fannie Mae guidelines and be approved for a mortgage. This article is not a commitment to lend nor does it guarantee the program without first verifying credit, income and all financial documents.  Please call me at 978-273-3227 or wnickerson@primelending.com to see if you qualify for a mortgage today.

So…What happend to Mortgage Rates??

As we have learned…The Fed, The Economy and Wall Street are very similar to the weather here in New England, just wait 5 minutes and it will be different. In this case it was a True Nor’ Eastah!!

Oops…was I not clear enough??

The Fed, which can be a love hate relationship, has a strategy that has been open-ended, it just pumped money into the economy, hoping things got better and for the most part, the economy is heading in the right direction.   Now, Fed Chairman Bernanke says he has a more definitive game plan or at least as definitive as the Fed can be!!  Mr. Bernanke will continue to buy Treasuries and bonds to stimulate the economy until unemployment falls to at least 6.5 percent — and as long as inflation stays low.   Overall, this has been his plan and he is announcing that if we keep this pace, he is going to back off on pumping these funds into the markets or increase as needed.  As we saw last month, Unemployment creeped up to 7.6% indicating the economy slowed.

Because of the comments and the timing of The Fed’s message this past week,  Investors on Wall Street ignored the details of Ben’s plans, even know they really have not changed that much.  The idea is to inject enough money into bonds and treasuries to keep long and short term rates low which will allow slow and steady growth in all sectors with Housing being the main focus.

“I think Wall Street overreacted,” said Bloomberg Government’s Nela Richardson. “It was almost as if Bernanke punched Wall Street in the collective gut, and that’s not what his intention was. He said — very clearly, I thought — that the Fed would begin to taper if — and only if — the fundamentals looked good. Not good enough, ‘good.'”

The markets are misreading the Federal Reserve’s messages as Investors reacted in a big way; the Dow Jones Industrial Average suffered its worst loss of the year. In the two days since Fed Chairman Ben Bernanke said the central bank expects to curb its big bond-buying program later this year, stocks tumbled, long-term interest rates rose and interest-rate futures contracts fell, meaning investors bet the Fed would raise short-term interest rates sooner than previously expected.

What investors did not hear was his second point: If the Economy does not meet the Fed’s expectations,  Ben Bernanke is then willing to adjust the pace to keep interest rates low.  Investors, the Markets, Wall Street and many others ignored this statement!  Again, causing the Dow to have it’s largest drop in over a year and mortgage rates to surge to their highest point in over 2 years.

So, where are rates today?  Just over a month ago, the 30 Year Fixed Conforming Mortgage rate was trading at 3.5% (plus or minus an 1/8^th).  Today, we are seeing this same rate trade at 4.375%-4.625%.  A full point higher than just a month ago. On a $100,000, this is an increase of $105 per month and on a Loan amount of $417,000, this is an increase of $240 per month.

In my opinion as well as a few others, we should see some type of correction in the Markets.  As these rates have moved so fast, it is possible this slows down the economy even more. It has brought refinancing of homes to a complete stand still.  Purchases should still move forward, but it will cause buyers to rethink the amount they are borrower in some cases.

For more information about mortgage rates, programs and the economy, feel free to email me at Bill@billnickerson.com

My Personal Passion: The Pan Mass Challenge

Bill Nickerson

In 11 days I will be riding in my 9th PMC, raising funds for The Dana Farber/Jimmy fund.  I’m very excited to have the opportunity to once again ride for a great cause!  Please help me, help them by donating to my ride this year.  Click the link to Donate to Bill’s ride.  Thank you for helping to make a difference!  Ride On Baby!!

To learn more about this great cause, I have enclosed some basic information about the Pan Mass Challenge.  Please see below.

About the PMC:
The Pan-Massachusetts Challenge is an annual bike-a-thon and a pioneer of the athletic fundraising industry that today raises more money for charity than any other single event in the country. The organization was founded in 1980 and has since raised $338 million for cancer research and treatment at Dana-Farber Cancer Institute through its Jimmy Fund. The PMC is a model of fundraising efficiency. The PMC donates 100 percent of every rider-raised dollar directly to the cause. In 2011, the PMC generated 60 percent of the Jimmy Fund’s annual revenue and it was Dana-Farber’s single largest contributor. Over 230,000 individual contributions were made to last year’s fundraising campaign. In 2012, PMC cyclists will ride with the goal of raising $36 million for Dana-Farber.

Click to Donate

The Ride:
The Pan-Massachusetts Challenge is a fully supported bike-a-thon — with food and water stops, mechanical and medical assistance, luggage transportation, and lodging — that runs through 46 towns across Massachusetts. Approximately 5,500 cyclists ride in the event. Cyclists choose from 11 routes of varying mileage designed to cater to all levels of cycling strength and fundraising ability. There are six two-day routes that range from 153 to 190 miles and five one-day rides that range from 25 to 110 miles. In 2012, cyclists are required to raise between $500 and $4,300 to ride in the PMC, depending on the chosen route.

When:
The 33nd annual PMC is Aug. 4 and 5, 2012. The ride has two starting lines on Saturday, Aug. 4, in Sturbridge and in Wellesley, and five finish lines in Provincetown (2), Bourne, Wellesley or Sharon on Saturday, Aug. 4 or Sunday, Aug. 5.

Bill Nickerson

Who:
Cyclists travel from 36 states and eight countries to ride in the PMC. Nearly 300 riders are cancer survivors or current patients. Some PMC cyclists are weekend warriors, others are trained triathletes. Most PMC participants ride in honor of a family member or friend fighting the disease. Cyclists range in age from 13 to 88. The average PMC cyclist is 45 years old, trains for three months, solicits 40 sponsors, and raises more than $6,000. During PMC weekend and throughout the year, more than 3,000 volunteers donate their time and 200 corporations provide over $4 million in products and services. The PMC was founded in 1980 by Billy Starr, who remains the event’s executive director, an annual cyclist and a fundraiser. It is presented by the Red Sox Foundation and New Balance.

YEARS RIDERS VOLUNTEERS DONATION
1980 – 1989 4,968 1,778 $3,665,800
1990 – 1999 16,668 11,921 $38,750,000
2000 – 2009 39,972 22,575 $227,200,000
32 Year Total 71,955 42,244 $338,000,000
2012 GOAL $36,000,000