Another Reason to Own A Home

In case you need another reason to purchase a home for you and your family; Here is an article I just read in the National Mortgage Professional Magazine, “Study Concludes Homeownership Tied to Positive Outcomes for Children“.  According to a new study by professors Richard K. Green and Gary D. Painter at the University of Southern California and Michelle J. White at the University of San Diego, “Homeownership is associated with lower high school dropout rates and lower teen birth rates.”  To read more about these findings, go to NMPM: Study Concludes Homeownership Tied to Positive Outcomes for Children and view the study results at Measuring the Benefits of Homeowning: Effects on Children Redux.  Let me know what you think about this information.  Do you agree or disagree?

For more information about home financing or the economy, please contact me at 978-327-3227  or Bill@billnickerson.com

What is a Rate Lock?

Essentially a rate lock/lock-in is a commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time. 

Here is how rate locks work; Although lenders can differ in how they handle their own rate lock basics, a typical locking in of a rate involves a lender agreeing to hold a specific mortgage rate for a guaranteed amount of time. Rates are locked in from 15 days up to 180 days.  Depending upon the rate lock period, the actual mortgage rate may vary; the longer your rate lock period, the higher the rate can be.  Most lenders will collect a rate lock fee or deposit as a way to secure your rate/business.  It is not an additional fee as it is credited back to you at closing.   By locking in your interest rate, you have secured the rate no matter what goes on in the market.  It will not go lower or higher during the processing of your loan.

Lenders may offer different options in establishing the interest rate and points that you will be charged, such as:
	Locked-In Interest Rate–Locked-In Points. Under this option, the lender lets you lock in both the interest rate and points quoted to you. This option may be considered to be a true lock-in because your mortgage terms should not increase above the interest rate and points that you’ve agreed upon even if market conditions change.
	Locked-In Interest Rate–Floating Points. Under this option, the lender lets you lock in the interest rate, while permit­ting or requiring the points to rise and fall (float) with changes in market conditions. If market interest rates drop during the lock-in period, the points may also fall. If they rise, the points may increase. Even if you float your points, your lender may allow you to lock-in the points at some time before settlement at whatever level is then current. (For instance, say you’ve locked in a 10½ percent interest rate, but not the 3 points that went with that rate. A month later, the market interest rate remains the same, but the points the lender charges for that rate have dropped to 2½. With your lender’s agreement, you could then lock in the lower 2½ points.) If you float your points and market interest rates increase by the time of settlement, the lender may charge a greater number of points for a loan at the rate you’ve locked in. In this case, the benefit you might have had by locking in your rate may be lost because you’ll have to pay more in up-front costs.
	Floating Interest Rate–Floating Points. Under this option, the lender lets you lock in the interest rate and the points at some time after application but before settlement. If you think that rates will remain level or even go down, you may want to wait on locking in a particular rate and points. If rates go up, you should expect to be charged the higher rate.

For more information about rate locks/lock-ins, please read this article written by the Federal Reserve Board.  A Consumer’s Guide to Mortgage Lock-Ins

Please contact me for information about rate locks or refinancing.

Bill@billnickerson.com    978-273-3227

What is a Business Cycle?

The “Books” say an average business cycle is 44.4 months and we have lived through many of them. Some longer than that and some as short as a season in New England.  A business cycle is like the exhibit from our youth…“What makes an ocean wave, wave” at the New England Aquarium.  In the exhibit, you get to move the wave with a lever and if you move the lever too much you have to pull it back as the wave comes crashing down…and again, you go too far the other way and the wave crashes in the other direction.  It’s impossible to control an ocean wave.  So here we are now in the middle of a business cycle “The Ocean Wave”. 

As Americans we do the same thing.  When we feel confident and wealthy, we tend to spend a little too much; perhaps buy a car that has all the bells and whistles or buy the  house we all dreamed of or even dined at the newest expensive restaurant we’ve never been to… building up that ocean wave.  We did this as a nation and created a very large wave.  We are in the “Trough” of the business cycle which is like a dead calm in the sea.  Nothing moves.  We are paralyzed by our own actions and cannot find a direction to get back…there is just no wind for our sails.  As individuals, we are going through our own personal process of what will get us back on track.  In some cases, we cancel our vacations, limit the activities our children participate in at school or even bring lunch every day.  By drastically cutting our spending, we have moved the “wave” too far in the other direction thus hurting the economy even further.  Not only have we given up those fancy dinners…we are not even going to the local diner for the blue plate special.

Consumer confidence is measured at an all-time low today and we are letting our emotions and fear govern our decisions and actions.  The News Media has the ability to heighten this fear by focusing on the negative and over emphasizing the issues at hand.   As FDR said, “The only thing we have to fear is Fear itself”.  This speech was given in 1933 in the middle of one of the biggest bank panics of the century which followed the Stock Market Crash of 1929.  There was a “RUN” on the banks where consumers wanted to withdraw all of the cash they had in the banks for fear it would be gone.  The banks had lent this money out for loans, mortgages etc. and the banks quickly ran out of cash.  FDR implemented the Federal Deposit Insurance Corporation “FDIC” that to this day insures our deposits up to $250,000.  This speech did spark a generation as well as the economy, and it was backed by a plan of how to get us moving as a country.  Today, we do not look up to our leaders.   And as of this moment, we do not have a plan of how to get out of the economic turmoil we are in.  So as a strong country, we must take matters in our own hands and move ahead…full steam ahead.

We are in a very unique situation in the economy: Mortgage rates are creating new historical lows every day, house prices are nearing levels of value we have not seen since 2004.  As we always do, we will look back on this day and say, “I wish I had bought that home, or vacation house or even that investment property”.  Trust me; it happens every time we go through these business cycles.  As I mentioned earlier, we are letting our emotions govern our business decisions.  That is not allowed in business.  It’s business and there is no crying in business!!  Remember the saying “Buy Low and Sell High”.  This is not just some catch phrase.  It is a sound business decision that should be followed regardless of your emotional ties. 

So what do we do now? 

·         Keep spending but in a healthy way.  Make sound buying decisions based on needs versus wants.  By putting some money back into the economy, we will slowly recover.

·         Look to your advisers!!  Not your friends or family, but your financial advisers.  This would be the person that handles your investments, your banking, and your estate.  These are professionals that do this time and time again all day every day. 

·         Be patient.  Throughout history we have experienced turbulent times in the business cycle.  And we have pulled out of it.  In the words of Warren Buffett, “Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We’ll break out of it. It takes time.”

For information regarding home financing or the economy, please contact me at     Bill@billnickerson.com   or    978-273-3227

Home Ownership….It’s still an American Dream

Every so often I come across information from other sources that I feel is relevant to what is going on in the economy in our area.  Today I want to share a great resource: the KCM blog.  In my opinion, their blog post today reaffirms that now is a great time to buy a home!

Source:   KCM blog:  National Housing Survey 2012  by The KCM Crew on April 4, 2012

Each quarter, Fannie Mae releases their National Housing Survey. They survey the American public on a multitude of questions concerning today’s housing market. We like to pull out some of the findings we deem most interesting each time it is released. Here they are for the most recent report:

84% of the general population believes that owning a home makes more sense than renting.

The Most Important Reasons to Buy a Home

When we talk about homeownership today, it seems that the financial aspects always jump to the front of the discussion. However, the study shows that the four major reasons a person buys a home have nothing to do with money. The top four reasons, in order, are:

1. It means having a good place to raise children and provide them with a good education
2. You have a physical structure where you and your family feel safe
3. It allows you to have more space for your family
4. It gives you control of what you do with your living space (renovations and updates)

The Home as an Investment

Though most people purchase a home for non-financial reasons, everyone realizes there is a money component to homeownership. Here is what they said on this issue:

• 63% of the general population believes that homeownership is a ‘safe’ investment.
• 53% believe that homeownership has more potential as an investment than any other traditional asset class.

Rent vs. Buy

We are always interested in the difference people see in renting vs. owning.

• 64% of renters have aspirations to someday own their own home
• 70% of renters think that owning is superior to renting

Bottom Line

Our belief in the value of homeownership grows each time this survey is released.

What is Earnest Money?

Earnest money is a money deposit made by a buyer to a seller as a sign of good faith that you are seriously interested in buying a home.  This earnest money is credited to the down payment at closing.  It is held in a non-interest bearing trust account until the time of closing. Typically, the buyer submits $500 to $1000 with the offer.  Once the offer has been accepted, the transaction moves forward to Purchase and Sales where another deposit is required.  This amount combined with the offer deposit will come to 5% of the accepted transaction amount.