How will the higher Mortgage Rates affect your Buying Power?

We have been spoiled with mortgage rates over the last few years  as we saw the the 30 Year Fixed Rate get to the 2.50% range.  As we move forward in 2022, mortgage rates have already started to climb.  Rates are in the 4.00% to 4.25% range and we now have to adjust our purchasing power. Each half of a percent (.50%) in mortgage rate equates to about $25,000 of buying power. Depending upon when you were “Pre-Approved” for a mortgage, the new rates may greatly affect the home you now qualify for.

What should you do? Call your Lender or Bank and have your “Pre-Approval” updated to reflect the current mortgage rate of today.  This will bring your purchase price and loan amount down as these higher rates will increase the overall cost of your mortgage payment.

Why is this happening?  When the Fed raises the federal funds target rate, the goal is to increase the cost of credit throughout the economy. Higher interest rates make loans more expensive for both businesses and consumers, and everyone ends up spending more on interest payments.

Those who can’t or don’t want to afford the higher payments postpone projects that involve financing. It simultaneously encourages people to save money to earn higher interest payments. This reduces the supply of money in circulation, which tends to lower inflation and moderate economic activity—a.k.a. cool off the economy.

 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 or email me anytime.

(C) 978-273-3227 or Bill’s Email 

Senior Loan Officer | NMLS #4194 | bill.nickerson@flagstar.com

So Why Do Mortgage Rates Change So Much?

Have you ever called a mortgage company and received a quote and then called back the next day and the same rate was no longer available??

Mortgage companies, Banks and Credit Unions are subject to potential daily and even hourly shifts in the market. Interest rates fluctuate on the simple principal of supply and demand.   

Mortgage rates trade based on Mortgage Back Securities and The Bond Markets as well as the overall economy.  The vehicles that mortgage rates are based on are considered very conservative, stable and tend not to have the wild swings that one would find in the Stock Market.  If the Stock market begins to see large increases or decreases, Investors will shift Billions of dollars in and out of the Stock Market and move them in to the Mortgage Markets.  This will cause mortgage rates to either rise or fall.  Stock Market tanks, good news for Mortgage Rates, Stock Market rallies and rates suffer.   Investors and Traders will constantly shift funds out of the riskier stocks into the safe haven of the mortgage markets.  These shifts can occur as little as once a day or in some cases can happen multiple times during a trading day. Thus causing mortgage rates to possibly change multiple times in a day.

These markets are affected globally as well; so even after the markets are closed in US, whatever is happening in Europe, Asia and around the world will cause our markets to move one way or the other.

What drives interest rates (click here for quick facts)

Here are some of the variables that are being watched in today’s market:

• Covid-19 – Global Pandemic
• Ukraine
• Europe and Asia’s Economy
• Comments by the President
• Politics
• The US Housing Market
• Unemployment in our Country
• The Price of Oil and Gas
• The “Feds” decision to move short term interest rates
• The overall health of the US Economy

Any of these items can trigger a rally one way or another.  Even a simple comment at a breakfast meeting by the President, the Fed Chairman or someone in power is enough to influence the markets.

Additional Mortgage Rate and Index Information:

To help us understand why mortgage rates change, it is important to realize that there is not one interest rate, but multiple ones. Below are some of the most prevalent interest rates and indexes that also have an impact on mortgage rates:

Prime rate – This rate is often offered to a bank’s best customers. If you are shopping for a home equity line of credit, then it is important to familiarize yourself with the prime rate. HELOCs are typically based upon the prime rate -plus or minus a certain percentage.

LIBOR – Stands for London Inter-bank Offered Rates. Libor rates are based upon the rates that a select group of London Banks offer each other for inter-bank deposits. Many adjustable rate mortgage programs use the Libor index.

Treasury bill rates ”T-bills” and Treasury Notes – These are short-term and intermediate debt instruments used by our Government to finance their debt. The treasury index is based upon the auctions of U.S. Treasury bills or on the Treasury’s yield curve. Like the LIBOR index, the U.S. Treasury index is a popular index for adjustable rate mortgage products. Also, the Twelve Month Treasury Average (12 Month MTA) is a popular index which is based upon the twelve month average of the monthly yields of U.S. Treasury securities (maturing in one year). The MTA is a popular choice for option arm mortgage programs.

Treasury Bonds – Unlike T-bills and Treasury Notes, treasury bonds are long-debt instruments. These bonds are used by the U.S. Government to finance its debt.

Cost of Savings Index – often referred to as the COSI index. This index is based upon the annual average of interest rates on World Savings deposit accounts. The average is pulled on the last day of each month.

11th District Cost of Funds – Often referred to as the COFI index – The COFI index is based upon the average of the borrowing cost to member banks of the Home Loan Bank of San Francisco of the 11th District. Unless you are shopping for an option arm mortgage, it is unlikely that your loan will be affected by this rate.

Certificates of Deposit Index – Often referred to as the CODI index – this index is arrived at by calculating the average of the past twelve months rates of 3 month CD rates.

Federal Funds Rate – The fed funds target rate is the rate which federally chartered banking institutions lend balances to other depository banks overnight.

This is a lot of information to weigh each day when calculating mortgage rates.  In general, most Banks, Investors, Lenders etc. will set rates around 10:30am once most of the morning economic reports have been released and the markets have had time to react to the information.  In a calm trading day on Wall Street, these rates would be good for that day.  In a day where lots of Economic reports and World events are occurring, these rates can be reset a few times as the Markets fluctuate.  It is important to call your lender or bank often to check on these rates as they can and will change.  It also important not to follow online rate sites that may be posting Average Rates as this information can be old as well a different Financial Picture then you may have.  The Freddie Mac rates are based on closed loans from last week and an average of .7 Points of fees in the rate. This may give you a range, but not accurate enough to base your mortgage payment on or what is happening today in the markets.

Bill Nickerson has been in the Mortgage industry since 1991. 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

The Home Buying Deal Killers

Buying a home is very exciting. However, nothing can be a bigger disappointment than finding out that your loan is denied before you are about to close your transaction!

You’re a week away from having the keys to your new home and your loan officer calls to let you know that your loan was denied due to a change in your financial profile. This can and does happen, But there are a few things that you can do to make sure that this won’t happen to you.

Keep the following points in mind while you are in the process of buying your home:

1. Don’t Apply for New Credit of Any Kind.  Don’t respond to any invitations to apply for new lines of credit and don’t establish new lines of credits for furniture, appliances, computers, department stores etc.  Even if there are no payments for 12 months, we will need to count this debt against you.  This will also have an adverse effect on your credit score.  Wait until your loan closes to purchase items for yourself and new home.  It is also important to limit the amount of times you have your credit pulled, as each occurrence will need to be explained.

2.  Don’t Max Out or Over Charge on Existing Credit Cards. Running up your credit cards is the fastest way to bring your score down.  Once you have engaged in the loan process, try to keep your credit card balances to below 30% of the available limit.

3. Don’t Close Credit Card Accounts. If you close a credit card account, it can negatively affect your FICO scores as your credit is based on History.  You may have a card that is never used, but dates back 10 years and your scores do weigh heavily on this. If you really want to close an account, wait until after you close the loan.

4. Don’t Raise Red Flags to the Underwriter. Don’t change your name and address, don’t co-sign on another person’s loan. Don’t open up a new checking/savings account, make sure your taxes are filed. The less activity that occurs while your loan is in process; the better it is for you.

5. Don’t Make Large Unexplained Deposits Into Bank Accounts. Any Deposits into your bank accounts that do not match your past income history will be questioned by an underwriter unless the deposit is documented as a gift or can be explained.  This includes cash deposits and moving funds from one account to another. Make sure you write your offer check from the same account you intend on writing your purchase and sales deposit.  All bank accounts must be verified.

6. Don’t Make Changes to Your Employment/Income. Employment stability is a huge factor in the underwriting loan process.  Quitting or changing jobs or even moving positions within the same company can greatly endanger your loan approval.   Inform your loan officer immediately of any changes to your job, position or income and even the hours you work.

7. Your Down Payment:  Do you have your down payment all set? Is it in one account?  Have this prepared before you purchase your home.  Whether it is gift funds, liquidation of your retirement or moving funds from one account to another.  By having these funds all in one account, it will simplify the process.  If you receive a Gift, let’s say for $1,000 from family, Don’t deposit $900 or $1100, as this will be hard to explain why the amount is different from the Gift amount.  Keep it Simple!

8. Do not make any Large Purchases:  If you purchase furniture with no payments for a year, banks will debt you for this.  If you buy a small home in cash, banks will debt you for the taxes and insurance.  College Tuition, even if the loans are deferred, banks will add this to your debts.

Bottom Line: Don’t Make Any Adjustments/Transfers in Your Financial Picture. If you even had to question your decision, make sure you talk to your loan officer first. Don’t make any changes in investments, Move your accounts or transfer, close accounts, open new accounts, or substantially alter your asset picture.

Share this with anyone you know who may be purchasing a home.

Remember, if you have a question, please call me anytime!!  It may be the difference in owning your new home or being denied!!

Bill Nickerson | NMLS #4194  | (c) l 978-273-3227 | Email Me.

Bill’s Website

Proactive Buyers help escrow close on time!

Maybe it’s not the most fascinating topic of the day. If you’re buying a home, however, and that “time is of the essence” phrase on the purchase agreement is really applied, how easily and quickly your escrow closes is indeed the kind of thing that can keep you up at night. No one likes a long, drawn-out closing process if it can be avoided. So let’s look at what YOU and all parties can do to make this closing thing a piece of cake.

Unless your purchase is a cash transaction, the typical agreement calls for a 30 to 45 day close in which buyers, sellers, and vendors are working tirelessly to execute the terms of the purchase. The reason so many buyer agents put an escrow or transaction coordinator (TC) in charge of this process is simple — having one person there to keep everyone on track is more than a luxury. If closing is to take place on time, it’s a necessity. Once a purchase price is agreed to, and your earnest money deposit has been deposited in the escrow account, the TC will become your best friend. If you make him or her happy, you’re halfway there.

The first thing many agents and homebuilder reps do is to have you and the seller fill out a contact sheet. This sounds like a ridiculously simple task, and it is. But its importance should not be minimized. With all contact info of all parties, escrow is then able to proactively reach out and communicate to everyone and begin gathering all the necessary paperwork and information. This includes information on not only buyer and seller, but also their lenders (if the home is paid off, happy day…). The title company to be used is also listed, plus anyone else vital to the transaction closing.

Of course, the purchase agreement needs to be buttoned up with all the necessary signatures, and escrow will need to contact any homeowner associations (if they exist) that need to be made privy to the transaction. Yes. This part is important. Ask any agent around, and they will tell you that escrow is often not made aware when there is a 2nd HOA, leading to closing delays. The more complete the information is upfront, the better the process will be. In fact, it’s wise to ask your agent for a “road map” for how closing works so that you can gaze at it as each step is completed. It may help you stay sane.

Just because you’re in escrow doesn’t mean it’s time to take that much-needed vacation. There will be time for that after the close of escrow, even if it took you many months traipsing through hundreds of houses to find this one. Finding parties to the agreement for vital information is ten times more difficult when they are floating in a pool somewhere on a tropical island. When escrow calls and emails with a request, jump. You heard that right. The quicker you respond, the more time and energy is saved. Check voicemail, texts, and email regularly during this 30-day process and respond promptly to all vendor requests to ensure an on-time close.

And don’t be afraid to ask questions through the process. Typically, the person in charge of your escrow will move quickly through a lot of their checklist, but they are never too busy to answer questions and explain how and what the documents mean. Escrow also appreciates clear communication on any special requests. Can’t be there for the close and prefer to sign documents in the office with a notary, e-sign on your phone or computer, or have a mobile notary visit your home to sign? These are arrangements that need to be put in place long before the closing date. And if there are other parties to the transaction (like co-signers) the same applies to them.

The lender and escrow will inevitably need to rely on each other for accurate and timely disclosure of all fees, so introduce them right away. The sooner they become household words to one another, the quicker the documents can be produced accurately and made available for review. This shortens wait times and helps avoid unnecessary delays when the deal comes closer to final loan documents, which will begin being referred to as “docs” — not of the medical variety.

Home inspections and final loan approval (any and all conditions placed on your approval must be removed) must be satisfied and signed off on before that magic day happens. So, if you’re in doubt that you are not doing all you can, call your lender, the TC, and even the escrow company to ensure that you are doing all you can to make this happen on time. Be the squeaky wheel, even though you may feel you are surrounded by all manner of experts who reassure you everything is fine. They may have dozens of transactions to be concerned about. You only have one.

Source: TBWS

Training for the Pan Mass Challenge

Bill Nickerson | NMLS #4194 | 978.273.3227 | Bill@billnickerson.com

 

If you can afford to Rent, Then you can afford to Buy!

If You Can Afford to Rent…Then You Can Probably Afford to Own.

Interest rates are near historic lows. Purchasing power has increased, and the cost of renting in many areas is now greater than the cost to buy. Some say mortgage loans are impossible to obtain without perfect credit and 20% down. Want the truth? Read on, and we’ll cite the three basic factors for qualifying for a home loan. 

Income – If you have a job or steady source of income, you’re off to a great start. If you’re already able to pay your rent on time each month, this could actually be easier than you might think. 

Assets – You rarely need a 20% down payment. In reality, many programs will work with 5%, 3.5% or 3%, and in some cases, even 0% down. As well, closing costs can sometimes be paid by lenders, sellers or come from gifts or grants. So if you think you’re out of luck just because you don’t have tons of cash, no worries. Chances are still good there’s a solution that may work.

Credit – Your credit is likely in good shape if you pay your bills on time and have avoided major issues like bankruptcy, foreclosure, short sales and judgments. Requirements will always vary, but there can still be reasonably flexible loan options, such as the FHA and Fannie Mae which both allow for low credit scores.

 That’s it. These three items are the fundamentals of mortgage lending. Exceptions will exist, but don’t be fooled into thinking the process is impossible. For those who work and pay their bills, there may not be a whole lot standing in the way of homeownership.

 I would like the oppurtunity to consult with you and start you on the path of Homeownership.  Whether it be for Today or planning for Tomorrow!

           Bill Nickerson NMLS #4194  | 978.273.3227  | Email | Website

Take the emotion out of buying a home using good business sense

There is a good deal of emotion wrapped up in buying a home. Determining where we will spend the most intimate as well as memorable moments of our lives is no small decision. And it is no doubt one of the biggest investments most of us will ever make.

Removing emotion is no easy task. But if we make an attempt to screw our heads on as investors and looked at buying home the way we might buy a stock or mutual fund, education is the key — asking what considerations are necessary in order to have a knowledge base before acting.

If you’ve been a renter, you know there are advantages to it as well as freedom. But what about the future, and permanency? The idea of buying goes beyond renting, since you are pouring your money into a single bucket all your own — not someone else’s. Even before that final mortgage payment is made, you will have been living in your investment as physical shelter, which is why buying a home is still considered one of the safest investments around. It’s not just a piece of paper, an account number or a line on a graph.

Look at this as a business proposition first and foremost by scrutinizing the proximity and access to basic services regarding health, supply, security, and transport. That house way up on a hill may make your heart flutter, but if minimum requirements such as electricity and gas systems, lighting, waste collection, and sewer services are a concern, your little slice of heaven can soon turn into a nightmare. It’s also a good idea to inquire about infrastructural projects in the area that have the potential to increase or decrease the value of the property. Can that golf course eventually get sold to developers for more housing? Will those abandoned railroad tracks get used for future transit? Either you or your Realtor can visit the local city planning offices and pose these questions or just take a look at plans for the area.

What about your personal needs? Will local regulations or the governing entity of the neighborhood allow you to build on to the existing structure or renovate the exterior? Speaking of exteriors, building materials are not meant to last forever. Whether the home you are considering is stucco or siding, think about painting and repairs down the road. If most of the interior is carpeted, what kinds of expenses would you be subject to when you replace it all with hardwood?

It’s always recommended that you accompany the individual doing the physical inspection of the house you are considering. Try out the water pressure, check the electric meter and boards, and hold your hand up to the AC vents. If a breaker trips in the middle of the night in a snowstorm, where will you have to traipse to re-set it? This is also when you can educate yourself as to the structural system of the house, including how to access some areas you don’t need on a daily basis. Your home becomes a living, breathing entity when you think of it as a vessel that needs care, maintenance, and an occasional face-lift.

Even though a home can be staged for sale beautifully with furniture and accessories, it’s important to visually remove the temporary fluff and consider whether your own furniture will fit if you don’t intend to buy all new items. A few overstuffed chairs facing a fireplace do not equal a family of four facing a big screen TV over that same fireplace. How much room would be left over for an adequately sized sofa or sectional? And when looking at bedroom space, has the stager used mostly twin beds in secondary bedrooms? Can you turn around in the laundry room when someone opens the door to the garage?

While a home’s listing should give you most of the financial information you’ll need, it may not tell it all. The costs of things like homeowners association fees (if any) should be a concern — how well is the association managed, are there any liens or lawsuits pending against it, how often has the fee gone up and what does it cover? Does the neighborhood have supplemental taxes levied against it for expenses normal property taxes don’t cover, such as lighting and landscape corridors? Some of these extra taxes last up to 25 years from the time a home is built, and not all are write-offs on taxes.

Of course, your knowledge of the market surrounding the house you are considering is key as well. What homes have sold recently, what was included in the price and how long did they take to sell? How does this house compare to any of them, and why might it be worth more or less? It may seem like overreach, but ringing a few doorbells in the surrounding neighborhood and asking a few questions is not a bad idea when you are considering such a large investment.

And lastly, know your rights as a consumer buying real estate, whether you have professional representation or not. Read up about them online or buy a few books so that you are at least armed with a slew of questions. You’ll be glad you did a little prep work, took some of the emotion out of the equation, and looked at this as an important personal business investment.

Source: TBWS

Bill Nickerson NMLS #4194

Over-improving your Home: doing too much of a good thing

Homeowners doing major renovations this summer may not want to hear it, but there’s actually such a thing as doing too much. Spending too much. Adding too much.

Bankrate‘s Dana Dratch says over-improving means you may be bringing a curse upon yourself: sinking so much into upgrades, renovations or additions that you’ve burned nearly all the equity of your home. If you plan to stay in your house for the rest of your life, perhaps it can eventually pay off. While it may increase the value of your property if you, like many homeowners, need to sell in the next 5-10 years, it’s likely you may never get 100 cents on the dollar, no matter what the improvement.

No. It doesn’t mean to stop dead in your tracks for your next renovation project. But it does mean you need to be careful in planning it, costing it out, and making sure it isn’t an exception to the rule in your neighborhood. Of course, if the improvements are for your own convenience — like adding a first-floor bedroom because you can’t face the stairs any more — that’s fine. But if your sole purpose is to increase the price of your home when you go to sell it, don’t take bets on it.

Dratch recommends asking yourself a few questions before you dive in. As mentioned, go ahead and over-improve if you’re going to stay there for a long time. If not, and your plan is to move in the next three to five years, resist the urge and bide your time. Realtors agree, however: there’s one in every neighborhood. There is always one guy who convinced himself that if he adds enough granite, hardwood, and molding to his modest house, he can get a premium price when it sells. Dratch quotes a Realtor who says, “Just because a house has new countertops and a brand-new master bath doesn’t mean you’ve made more square footage in your house. Compared to houses down the street with the same amount of square footage, the prices will be basically the same,” she says.

Watch a lot of HGTV? Remember that the Fixer Upper couple as well as the Property Brothers look for the shabbiest, lowest-priced house in the BEST neighborhoods. Once they’ve done their magic, that house will simply match the value of the homes around it.

If you own a $400,000 house in a $400,000 neighborhood and do a slew of renovations and additions, don’t plan to turn around and list it for $700,000. Your Realtor can help you by checking values and running comparable properties in your area to see if your plans are in line with what appraisers can get their heads around or you are totally off-base. Why do you need to appease appraisers? Because the majority of homebuyers get a mortgage, and a bank won’t lend on a house unless the appraisal makes sense.

Seems unlikely, but even kitchens and bathrooms can be overdone. AND it can scare buyers. If your house is the most expensive in the neighborhood, potential buyers will be apprehensive about signing on the dotted line. Adding a room and increasing the square footage may mean the house should be worth more, but if that addition puts you at or over the highest prices in the neighborhood, it won’t be a cakewalk to sell. On top of that, you may have just taken up a chunk of yard space with it. The size of the yard matters to buyers, even in the most upgraded house.

Did you go crazy taking out closets to make playrooms, dens, and home offices or using a bedroom as a walk-in closet? You just lowered your bedroom and bath count and lowered the value of your home. Appraisers don’t consider a room a bedroom without a closet. Oh, and that gorgeous pool and spa you spent $50K putting in? To some buyers, it represents hours of good times and entertaining. To others, it represents bigger energy bills and maintenance. It also might take up too much of your yard, leaving little room for kids to play and dogs to romp.

If you are selling your home in the near future, keep your improvements neutral and check with your Realtor about whether the renovations you have planned offer a decent return on investment.

Source: Bankrate, TBWS

Bill Nickerson | NMLS #4194 | 978.273,3227

5 Indicators of Where the Market’s Headed

5 Leading Indicators to Gauge Where
The Real Estate Market Is Heading

There are several key indicators that may predict what to expect in the weeks and months ahead. Instead of relying solely on the more sluggish statistics of home sales and pending contracts, knowing the following info will give you a much clearer perspective on the market.   

In total, there are five leading economic indicators:

#1: New listings available – On the supply side of things, signs of improvement are on the horizon.

In April, Redfin reported there was a staggering year-over-year decline in new listings of just over 50%. Now, however, both Redfin and Realtor.com have shared data from mid-May showing that annual stat has already shrunk to around 30%.

#2: Demand for homes – It’s no secret the real estate market relies heavily on supply and demand.

Thanks to states slowly opening back up for business, CNBC reported buyers have been “coming out in force,” wearing their masks for showings and ready to buy sooner than anticipated. Even in the first week of May, Redfin had noted its agents were experiencing demand that was 5.5% higher than even 2020’s pre-pandemic numbers. And just last week, mortgage applications rose 6% from the week before. Demand has also been fueled by the fact mortgage rates remain generously low, and many agents are doubling-down on using tech to show homes and close deals as needed.

#3: How long houses are sitting – As past trends would show, the longer a house takes to move, the more likely it may sell for less than its asking price.

Some sellers may find themselves waiting a bit longer to close a deal, as  Realtor.com recently found properties in the 99 largest metros across the country have been on the market for an average of 13 extra days, compared to a year ago. And even though buyers have been coming back out of the woodwork, there’s still a decent amount of would-be homeowners waiting until it feels a little safer to make the commitment.  The National Association of Realtors (NAR) did a survey where 40% of agents said their clients put their purchasing on pause for “a couple of months.

#4: Pricing – Although recent data has shown home prices are still 1.4% higher than a year ago,

Zillow has forecasted an overall dip of 2-3% by the end of 2020. While this may not be the news some people want to hear, to put this in perspective, we survived a much larger dip when the Great Recession dented home prices just over 27%. Plus, this is just one perspective. Fannie Mae has forecasted that the average existing-home price in 2020 will be $283,000, which is an overall growth of 4% compared to 2019.

#5: Job markets / unemployment rates

As with any other part of the economy, employment and financial stability influence the real estate market. As noted before, a decent segment of agents have reported their clients hitting the pause button on their home searches for a couple months. When it comes to those looking to sell, it really comes down to their personal situations. Some may want to stay put to avoid struggling to find their next abode, others may need the cash and/or want to shed having a monthly mortgage payment lingering over their head.

The market is still active. Your clients don’t have to sit on the sidelines while rates are at all-time lows. Contact me today to see how we can work together to help your clients match with a mortgage that meets their current needs, while supporting their goals for the future.

Bill Nickerson | Senior Loan Advisor | Flagstar Bank | Email | Bill’s Website

1500 District Avenue, Burlington MA | NMLS #4194

Can you still purchase and negotiate a home during this time?

3 Key Things To Know When Purchasing        Property In A Pandemic

While the ongoing pandemic has created a lot of uncertainty within industries and households alike, one thing is for sure:

Over the last couple months, the entire world has shown an astonishing ability to adapt and get things done. Technology (ex. virtual tours) has allowed agents and clients to continue working together.

If you have clients looking to make a home purchase right now, I’d like to share three key points you can guide them on during this time.

1. “How do I negotiate an offer right now?”  Empathy and awareness are important. While sellers might be open to lower offers during this time, most people won’t want to deal with someone they feel is trying to low ball and take advantage of the situation. Help clients understand the value of the home they’re interested in, and help create a reasonable offer.

2. “Understand a longer closing period is likely” For now, going straight from getting that offer accepted to the closing table is no longer the norm. With social distancing being a top priority, many of us are shifting to remote work. Clients should know that closing may take longer than the usual 30 days, while appraisers, home inspectors, and repair contractors adjust their workflow and availability.

3. “Waiting for loan rates to drop may backfire” Due to COVID-19, rates and investor guidelines are changing on a day-to-day basis. Because of this, locking in current mortgage loan rates instead of floating them to hope they go down further may be the wisest choice for clients, right now. With rates already at historic lows to begin with, this also locks in the underwriting guidelines at the same time so clients aren’t affected by subsequent changes.

By locking in a mortgage loan rate today, your clients can rest assured they’ll have a rate (and loan qualifications) that won’t budge due to changes in the market.

Additional Tip: Encourage your clients to over-communicate with their lender. Once again, the credit markets are shifting rapidly right now. It’s more important than ever for your clients to be working closely with a mortgage professional like me that can help keep them in the loop, find and secure the best financing for their current situation (and future goals), and swiftly navigate the closing process.

Contact me today to discuss how we can work together to help your clients negotiate an offer for their dream home during this time!

Bill Nickerson | Senior Loan Advisor | NMLS 4194

Cell: 978.273.3227 | 1500 District Ave |  Burlington, MA  01803

Bill’s Email

How does refinancing save homeowners money?

Question: How does refinancing save homeowners money?

There are two categories of refinancing, “rate-and-term” and “cash-out.” Both can save you money.

The first type, rate-and-term, replaces your existing loan with one that has a better rate and/or terms. You might replace an ARM or balloon loan with a fixed-rate loan, for example. Or you may decide to lower your rate AND shorten your term. Some borrowers have been able to refinance from a 30-year loan into a 15 or 20-year loan, reducing the term, without appreciably raising their payments.

A borrower does not receive any significant amount of cash in a rate-and-term refinance; lenders generally consider that any cash proceeds above $2,000 pushes the loan into a cash-out category.

There are always certain costs involved in any mortgage transaction; there will always be fees for title, escrow, underwriting and document preparation, for example. Borrowers can add these fees to their new loan so as to avoid having to pay them in cash. Financing these items is not considered cash-out.

When you are deciding whether to do a rate-and-term refinance, you should evaluate it in two primary ways: first, how long will it take to recover the cost of doing the loan? For example, if the closing costs amount to $3,000 and the reduction in rate gives a saving of $1,500 per year in the first year, it will take approximately two years to “break even.” For most people, this time frame is more than satisfactory, but you should make your own decision. The second criterion is net savings over some time period, say five years, ten years or more.

Homeowners with adjustable rate mortgages (ARMs) may decide to refinance into a fixed rate loan, even though their rate may initially be higher, they might feel more secure knowing that their rate will never change. This is more of a defensive strategy to guard against the possibility of a higher rate in the future, but it may not “save money.”

The other type of refinance, a “cash-out,” is one where the borrower receives cash of more than $2,000 at closing. This is accomplished by getting a new loan that is larger than the balance of the old one plus closing costs. Borrowers can use that money for anything. Some homeowners have used cash-out refinances to pay off consumer debt, like car loans, student loans, and credit cards. Using home equity to pay off credit cards can drop the payment dramatically! But paying down installment loans can create a false economy. A $30,000 car loan with an interest rate of 6% will have a payment of $500, but paying off that loan with the proceeds of a home refinance will effectively drop the payment to $150—but does it really make sense to finance a car for 30 years?

Hope this is useful

Bill Nickerson

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